50 week MA Test

Discussion in 'Strategy Building' started by Turboman24, Nov 26, 2002.

  1. I'm writing a paper for a college finance class, and within it, I'm going to try and prove that buy and hold is a joke. I want to calculate the results of owning stock from 1950 until the present only when the S&P is above its 50 week MA, and being in bonds the rest of the time, using 6% as a standard yield. This will be in comparision to buy and hold during the same period. My professor thinks TA is and absolute joke. I have a feeling this simple system is going to beat buy and hold by a mile.

    Anyway, does anyone know of an inexpensive backtesting program I can buy, and is it possible to program the computer to figure in the yield while its not in stocks? I don't know much about backtesting, obviously. Am I getting in over my head?
  2. Try Amibroker (ca $80-90) or Ensign Internet ($40 a month). See the software section of this site.
  3. Aaron


    Maybe this could be done on wealth-lab.com for free.
  4. dbphoenix


    You're going to have a problem going back to 1950. You can get monthly close data going back to the mid-sixties from the NYSE site, but if you're at a university and are familiar with the literature in finance, you ought to be able to get this data at the library. If you can get it in a format that's downloadable to Excel, you can then create your own 12-month MA (12 months = 48 weeks = 240 days). Since you're not applying an MA to bonds, you can then just look up the yields on bonds during those times when the NYSE is below its 12m MA (the S&P seems not to maintain the online data library it used to, but perhaps someone else knows of a source).

    On the other hand, it's highly probable that what you want to do has already been done. Again, if you're at a university, do a search of the literature, particularly masters' theses and doctoral dissertations.

  5. Just remember to use a buy price higher than the crossover and a sell price lower. The ma indicator lags. How much higher and lower is the big question, but I'd imagine it would be relative to the rate of change during the crossovers. . Good luck and please let us know how it turns out.
  6. Here's something that's kind of interesting. Don't know if it's legit
    or not, but outperforms buy and hold:

    To buttress the case for reality, twice a year for the last decade, we have presented the case for market timing using a "system" discovered by market historian Yale Hirsch years ago and effective with only two simple investment decisions each year. For more than 50 years, this methodology has produced superior and virtually unmatchable gains, further proof that any spin devised by Wall Street pros is utterly useless in the long run. As our chart clearly illustrates, an initial investment of $ 10,000 in 1950 has grown to $ 426,227 in the months November to April. Our methodology sells the Dow Industrials at the close of trading every April and buys the Dow at the beginning of each November. Conversely, the same $ 10,000 invested in only the months of May through October has grown to a paltry $ 11,750! Hardly worth the effort.