Moving Average Convergence Divergence Trading Strategy to Volatility Portfolios
Post by MSF Chula at Sunday, 10 January 2021 06:17 PM

In this paper, I measure excess returns generated by different formation of MACD indicator and examine the beat formation of MACD indicator that suit to Thai stock market. Then, I measure abnormal returns of the MACD timing strategy over the buy-and-hold strategy on Thai stock market when compared to the overall market factors such as market, SMB, HML factors which are regarding to the capital asset pricing model (CAPM) and the Fama-French (1993) three-factor model. Moreover, I measure robust abnormal returns of the MACD timing strategy over the buy-and-hold strategy when compared to the macroeconomic factors such as default spread and market liquidity which are regarding to the conditional Fama-French (1993) 3-factor model. Finally, I also examine whether the MACD timing strategy can generate the abnormal returns corresponding to the level of risk represented by volatility decile portfolios and can detect trends when compared to market timing factor.

The results imply that the MACD timing strategy can generate the excess returns over the buy-and-hold strategy for all formations of MACD indicator and the best formation of MACD indicator is MACD (5, 35, 5) which give the maximum excess returns on Thai stock market. Furthermore, The MACD timing strategy can create the abnormal returns when compared to the overall market factors and macroeconomic factors and the abnormal returns tend to be increasing values corresponding to the level of risk. Finally, the MACD timing strategy can create the abnormal returns and detect trends when compared to the market timing factor but not corresponding to the level of risk.

Last updated at Sunday, 10 January 2021 06:17 PM