The Profitability Research of Trading Volume on The Moving Average Rule

[[abstract]]In this paper, we mainly investigate whether companies with high trading volume imply the fact that having a less serious problem of information asymmetry so that investors can't earn higher return by adopting moving average rules instead of buy-and -hold strategy. Our methodology is based on moving rules of Brock, Lakonishok, and Lebaron (1992) and Metghalchi, Chung, and Marcucci (2007), and we use three kinds of long days moving average rules ( 50, 100, 150 days ) and one day short day moving average rule. our empirical results show that most companies have better returns in sell days during the period of 2010. Moreover, companies with low trading volume have significantly higher returns than the higher trading volume ones.Another way, the strategy trading model's empirical results show that companies with high trading volume have significantly high returns among all the three strategy trading models, while the best strategy rule is strategy trading (1,100). Therefore, investors can earn higher returns by strategy trading (1,100) than buy-and-hold strategy.Finally, we adopt Hansen (2005) Superior Predictive Ability to test the empirical results, and we find among the companies with middle and low trading volume, whose best predictive trading rules are moving average rules ( 1,150)； the biggest trading volume ones, whose best predictive trading rules is moving average rules ( 1,100)；as a whole, the total sample's best predictive trading rules is moving average rules ( 1,150)