Moving average distance as a predictor of equity returns

Doron Avramov; Guy Kaplanski; Avanidhar Subrahmanyam

doi:10.1002/rfe.1118

Moving average distance as a predictor of equity returns

Doron Avramov, Guy Kaplanski, Avanidhar Subrahmanyam

Research output: Contribution to journal › Article › peer-review

15 Scopus citations

Abstract

The distance between short- and long-run moving averages of prices (MAD) predicts future equity returns in the cross section. Annualized value-weighted alphas from the accompanying hedge portfolios are around 9%, and the predictability goes beyond momentum, 52-week highs, profitability, and other prominent anomalies. MAD-based investment payoffs survive reasonable trading costs faced by institutions, and are stronger on the long side relative to the short counterpart.

Original language	English
Pages (from-to)	127-145
Number of pages	19
Journal	Review of Financial Economics
Volume	39
Issue number	2
DOIs	https://doi.org/10.1002/rfe.1118
State	Published - Apr 2021

Bibliographical note

Publisher Copyright:
© 2020 University of New Orleans

Keywords

anchoring bias
crossing rules
market efficiency
moving averages
technical analysis

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10.1002/rfe.1118

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Moving average distance as a predictor of equity returns

Abstract

Bibliographical note

Keywords

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