The mathematicians aren’t fond of moving-average trading rules:
For every day in the sample, we can compute one average price of that stock using the previous m observations x_m, and another average price using the previous n observations x_n, where m < n. A popular investment strategy called “crossing moving averages” consists in owning X whenever x_m>x_n. Indeed, since the sample size determines a limited number of parameter combinations that m and n can adopt, it is relatively easy to determine the pair (m, n) that maximizes the backtest’s performance. There are hundreds of such popular strategies, marketed to unsuspecting lay investors as mathematically sound and empirically tested.
The paper offers some neat suggestions related to minimum backtest length and number of trials.
They also have a website: Mathematicians Against Fraudulent Financial and Investment Advice (MAFFIA)
Can you say “GEEK?”
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