R. Gencay et T. Stengos, Moving average rules, volume and the predictability of security returns with feed forward network, J FORECAST, 17(5-6), 1998, pp. 401-414
This paper uses the daily Dow Jones Industrial Average Index from 1963 to 1
988 to examine the linear and non-linear predictability of stock market ret
urns with some simple technical trading rules. Some evidence of nonlinear p
redictability in stock market returns is found by using the past buy and se
ll signals of the moving average rules. In addition, past information on Vo
lume improves the forecast accuracy of current returns. The technical tradi
ng rules used in this paper are very popular and very simple. The results h
ere suggest that it is worth while to investigate more elaborate rules and
the profitability of these rules after accounting for transaction costs and
brokerage fees. (C) 1998 John Wiley & Sons, Ltd.