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PERFORMANCE OF FIXED MOVING AVERAGE AND BANDWIDTH TRADING RULES IN FRONTIER AND EMERGING STOCK MARKETS
Keywords:
fixed moving average, bandwidth trading rules, market efficiency, frontier markets, emerging markets, technical analysisDOI:
https://doi.org/10.17654/0972361725060Abstract
This study examines the performance of fixed moving average (FMA) trading rules in emerging stock markets, specifically Vietnam, Thailand, and Indonesia, over the period 2000-2019. Using daily closing prices of VN-index, SET-index, and IDX composite, the study applies four FMA strategies, including a 1% bandwidth filter, and assesses their profitability while incorporating a 1% transaction cost. The dataset is divided into two sub-periods (2000-2007 and 2008-2019) to analyze structural changes in market efficiency.
Empirical results indicate that FMA strategies generated superior returns before 2008, outperforming the simple buy-and-hold strategy. However, post-2008, most FMA rules underperformed the buy-and-hold strategy, suggesting that market efficiency has improved over time. The study confirms that filter bands help reduce false signals but do not fully eliminate price distortions. Transaction costs significantly impact net profitability, reinforcing the importance of cost-efficient execution.
The findings contribute to the ongoing debate on technical trading in emerging markets. While FMA strategies remain viable, their effectiveness depends on market structure, investor behavior, and transaction costs. Future research should explore alternative filter thresholds and integration with other technical indicators to enhance strategy performance.
Received: May 1, 2025
Accepted: July 14, 2025
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