Dynamically Adjustable Moving Average (AMA’) technical analysis indicator to forecast Asian Tigers’ futures markets

• Main Author: Chan, Jacinta Phooi M'ng
• Format: Article
• Published: Elsevier 2018
• Subjects: HF Commerce; HG Finance
• Online Access: http://eprints.um.edu.my/21024/; https://doi.org/10.1016/j.physa.2018.06.010

To determine the predictability of futures time series, the daily stock market indices’ futures returns from the Asia Tigers countries, namely Hong Kong's Hang Seng Futures (HSF), South Korea's KOSPI Futures (KOSPIF), Singapore's SiMSCI Futures (SiMSCIF) and Taiwan's TAIEX Futures (TAIEXF) from 2006 to 2013 are examined for profitability results using technical analysis indicators. A dynamic volatility indicator, named Adjustable Moving Average (AMA’) is used as a trade timing devise to seek returns above the threshold buy and hold strategy. Using the information learnt during this in-sample period, further tests are conducted on an out-of-sample period, 2014–2015 to validate the viability of AMA’. AMA’ adjusts to the prevailing market conditions, to avoid some whipsaws (trading losses) in range trading and capture a larger portion of profit by entering into the new trends early. Using the trading signals from AMA’ and the other moving averages rules, evidence of returns after transaction costs above those of the threshold passive buy and hold strategy are found in these time series’ returns, especially more so for AMA’. The results here suggest that it is worthwhile to investigate the profitability of moving averages trading rules, especially the more adjustable ones.