Data-Snooping, Technical Trading Rule Performance, and the Bootstrap |
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| Authors: | Ryan Sullivan Allan Timmermann & Halbert White |
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| Institution: | Economic Analysis LLC,;University of California, San Diego and the Financial Markets Group, London School of Economics,;University of California, San Diego |
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| Abstract: | In this paper we utilize White's Reality Check bootstrap methodology (White (1999)) to evaluate simple technical trading rules while quantifying the data-snooping bias and fully adjusting for its effect in the context of the full universe from which the trading rules were drawn. Hence, for the first time, the paper presents a comprehensive test of performance across all technical trading rules examined. We consider the study of Brock, Lakonishok, and LeBaron (1992), expand their universe of 26 trading rules, apply the rules to 100 years of daily data on the Dow Jones Industrial Average, and determine the effects of data-snooping. |
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