I have not read this white paper (from Oz) but a few readers have emailed it in so I thought I would pass along.
Market Timing with Moving Averages by Paskalis Glabadanidis, University of Adelaide Business School
Abstract:
I present evidence that a moving average trading strategy dominates buying and holding the underlying asset in a mean-variance sense using monthly returns of value-weighted decile portfolios sorted by market size, book-to-market cash-flow-to-price, earnings-to-price, dividend-price, short-term reversal, medium-term momentum, long-term reversal and industry. The abnormal returns are largely insensitive to the four Carhart (1997) factors and produce economically and statistically significant alphas of between 10% and 15% per year after transaction costs. This performance is robust to different lags of the moving average and in subperiods while investor sentiment, liquidity risks, business cycles, up and down markets, and the default spread cannot fully account for its performance. The substantial market timing ability of the moving average strategy does not appear to be the main driver of the abnormal returns.
