Revisiting the Profitability of Market Timing with Moving Averages

In a recent empirical study by Glabadanidis ("Market Timing with Moving Averages" (2015), International Review of Finance 15(13):387-425), the author reports striking evidence of extraordinarily good performance of the moving average trading strategy. In this paper, we demonstrate that this "too good to be true" reported performance of the moving average strategy is due to simulating trading with look-ahead bias. We perform simulations without look-ahead bias and report the true performance of the moving average strategy. We find that, at best, the performance of the moving average strategy is only marginally better than that of the corresponding buy-and-hold strategy. In statistical terms, the performance of the moving average strategy is indistinguishable from the performance of the buy-and-hold strategy.