Re: Technical Analysis in the United Kingdom

Lorenzo Vercesi (ik2hlb@venus.it)
Thu, 8 Apr 1999 02:43:50 +0200 (MET DST)

>> Autocorrelation value between Monday-Friday returns of SP500 >>(analysis on
>> data from 1960) is 0.26 (1892 samples, 0.046 5% Bartlett test).

>Ah! I was born in the wrong year! Too bad - I could have become a
>billionaire...

Markus,
sorry but my English is not good. Not during sixties, but *from* 1960
today. Of course autocorrelation value is decreasing, but I had not seen
a deep decreasing after Box-Jenkins book...

Test is easy, and data is downloadable from yahoo-finance.
Suppose to analyse only 1997 and 1998 data.
If you use simple strategy to buy index if Friday return is >1% and to
sell short if is <-1%, and exit Monday at close market, money stay in
the market only for 33 days, obtaining 160 SP500 points of profit (buy
and hold gain 489 point). It is a simple way to improve Sharpe ratio of
your (past) investment.
I suggested use of futures not for leverage (you can put leverage=1),
but for low trading commisssion (you can trade, today, about $325K for
$20 round-turn) and as a good proxi of SP500 index (is not usual to have
money to trade right weight of 500 stocks).

>Better: it *would have permitted* good profit.

Of course. But without a time-machine is very difficoult for a
statistician to analyse next year data...

---
I confess to be surprised: this stock-market anomaly (week-end effect)
is explained in all planet's universities...

-Lorenzo Vercesi

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