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Optimal lengths of moving averages for the MACD oscillator for companies listed on the Warsaw Stock Exchange

Krzysztof Borowski () and Izabela Pruchnicka-Grabias ()
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Krzysztof Borowski: Warsaw School of Economics, Collegium of Finance and Management
Izabela Pruchnicka-Grabias: Warsaw School of Economics, Collegium of Socio-Economics

Bank i Kredyt, 2019, vol. 50, issue 5, 457-478

Abstract: The aim of the paper is to find optimal exponential moving averages for the main technical analysis oscillator MACD (Moving Average Convergence Divergence) which trigger buy and sell signals for companies from the WIG20 index, the mWIG40 and the sWIG80 index, listed on the Warsaw Stock Exchange. The analysis was conducted on the basis of data collected from 17 November 2000 to 31 December 2018, i.e. from the day when the WARSET system was introduced. The optimization was done with the method based on rates of return because they influence the final investment result. It is the first research of this kind on the Polish financial market. It shows that each of the examined companies has its own lengths of moving averages which optimize rates of return, however, for some enterprises these values may be the same. Many research papers on technical analysis apply standard lengths for averages used in MACD. The authors of the present paper find out that investors should not follow them automatically, but rather look for optimal values for each market and each company. Such an opinion stands in sync with research literature which proves a varying efficiency of technical analysis tools, depending on the market development level, its transaction volume or its liquidity.

Keywords: technical analysis; MACD; moving average (search for similar items in EconPapers)
JEL-codes: G15 G17 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:nbp:nbpbik:v:50:y:2019:i:5:p:457-478