EconPapers    
Economics at your fingertips  
 

Risk and return of a trend-chasing application in financial markets: an empirical test

Jukka Ilomäki ()
Additional contact information
Jukka Ilomäki: University of Tampere

Risk Management, 2018, vol. 20, issue 3, 258-272

Abstract: Abstract The paper introduces an application of the moving average trend-chasing rule that effectively reduces the risk of portfolios. The results are fairly robust: all our moving average lags produce about 36% (34%) less Value-at-Risk and about 31% (30%) less expected shortfall without giving up any returns on average after transaction costs compared to the buy-and-hold strategy, calculated in local currencies (in U.S. dollars). In addition, the paper finds that the volatility of returns follows a similar pattern by producing on average 29% (30%) less volatility in local currencies (in U.S. dollars). Moreover, the CAPM betas of the trading rule are significantly lower (50%) than in the buy-and-hold strategy.

Keywords: Value-at-Risk; Expected shortfall; Volatility; Investment decision; Stock returns (search for similar items in EconPapers)
JEL-codes: G02 G11 G32 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1057/s41283-018-0036-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:risman:v:20:y:2018:i:3:d:10.1057_s41283-018-0036-1

Ordering information: This journal article can be ordered from
https://www.palgrave.com/gp/journal/41283

Access Statistics for this article

Risk Management is currently edited by Igor Loncarski

More articles in Risk Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2020-01-08
Handle: RePEc:pal:risman:v:20:y:2018:i:3:d:10.1057_s41283-018-0036-1