We propose a generalized version of the moving average converge divergence (MACD) indicator widely employed in the technical analysis and trading of financial markets. By assuming a martingale model with drift for prices, as well as for their transformed values, we propose a test statistic for the local drift and derive its main theoretical properties. The semi-strong market efficiency hypothesis is assessed through a bootstrap test. We conclude by applying the indicator to monitor the crude oil prices over a six years period.
Bartolucci, F., Cardinali, A., Pennoni, F. (2018). A generalized moving average convergence/divergence for testing semi-strong market efficiency. In M. Corazza, M. Durbán, A. Grané, C. Perna, M. Sibillo (a cura di), Mathematical and Statistical Methods for Actuarial Sciences and Finance (pp. 101-105). Springer International Publishing [10.1007/978-3-319-89824-7_18].
A generalized moving average convergence/divergence for testing semi-strong market efficiency
Pennoni, F
2018
Abstract
We propose a generalized version of the moving average converge divergence (MACD) indicator widely employed in the technical analysis and trading of financial markets. By assuming a martingale model with drift for prices, as well as for their transformed values, we propose a test statistic for the local drift and derive its main theoretical properties. The semi-strong market efficiency hypothesis is assessed through a bootstrap test. We conclude by applying the indicator to monitor the crude oil prices over a six years period.
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