Practical Applications of The Profitability of Technical Analysis during Financial Bubbles

Abstract

In The Profitability of Technical Analysis during Financial Bubbles, from the November 2020 issue of the The Journal of Portfolio Management, authors Bala Arshanapalli, Matthew Lutey, William Nelson, and Micah Pollak (all of Indiana University Northwest) identify an opportunity to use technical analysis to profit during financial bubbles. The authors use a moving-average technique to detect trends within bubbles that signal when it is profitable to sell an asset. They then test this technique and find that it outperforms a buy-and-hold strategy for three of five historical financial bubbles in the US stock market and for three international markets: France, Japan, and the United Kingdom.

TOPICS: Developed markets, financial crises and financial market history, portfolio theory, technical analysis