Testing momentum and simple moving average strategies in precious metal's, equity indices and currency markets

Abstract

This study examines whether technical analysis using the time-series momentum (MOM) and simple moving average (SMA) rules can be implemented in 4 precious metal's, 4 equity indices and 12 currency markets, to outperform a passive buy and hold strategy. The results show that technical analysis and the strategies tested, performed very well on in-sample data for the total period from 1970 to 2012, and out-performed the buy and hold strategy with both higher return's and lower risk. Of the assets tested, the strategies worked best on precious metal's and equity indices, with good but poorer results for the currency pairs. The performance of testing the precious metal's in three sub sets, revealed that the extraordinary performance of the metal's in the 70's and in the last decade, would have been less impressive had a portfolio been actively traded in the time period from 1980-2000. However, note that palladium was the exception and delivered extraordinary results also in this time period.