Can exchange-traded funds be profitably traded with the trading range breakout technical trading rule?

Kok-Leong Yap (), Wee Yeap Lau and Izlin Ismail ()
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Kok-Leong Yap: Faculty of Business and Economics, University of Malaya, Kuala Lumpur 50603, Malaysia
Izlin Ismail: Faculty of Business and Economics, University of Malaya, Kuala Lumpur 50603, Malaysia

International Journal of Financial Engineering (IJFE), 2022, vol. 09, issue 04, 1-21

Abstract: This study investigates whether the trading range breakout technical trading rule can be applied in exchange-traded funds. Using the samples of crude oil exchange-traded funds, namely USO, USL, UCO, and DBO, that track West Texas intermediate (WTI), the results indicate that the trading range breakout technical trading rule outperforms the benchmark buy-and-hold strategy. In addition, a volatility-based trading range breakout technical trading rule is proposed to enhance trading performance. The results suggest that the proposed TGARCH-MA can be used as a technical trading rule to assist investors and fund managers interested in using the trading range breakout in exchange-traded funds.

Keywords: Trading range breakout; GARCH; volatility; exchange-traded fund; West Texas intermediate (search for similar items in EconPapers)
JEL-codes: G12 G14 G17 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S242478632250027X

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