Simple Moving Averages: A Ten-Year Test

Abstract

The intent of this thesi s is to prove whether or not simple moving averages can be used to predict the future price performance of stocks and outperform the buy-and-hold method of investing in the stock market. The importance of this research is that if moving averages can predict future price performance then they could be used as a way to gain an advantage when investing in the stock market. Historical prices for 29 of the 30 stocks currently in the Dow Jones Industrial Average were used to empirically test a variety of moving average criteria to buy and sell stocks to see if the buy-and-hold method could be outperformed. It was found that the moving averages tested could not compete with the buyand- hold method and that historical price movements could not predict future performance. The results in this thesis provided further evidence for the Efficient Market Hypothesis and the Random Walk Hypothesis and demonstrated that moving averages may not be a valid and successful way to invest in the stock market.