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Journal of Asset Management

, Volume 2, Issue 2, pp 162–179 | Cite as

Can profitable trading strategies be derived from investment best-sellers?

  • C Brooks
  • W Chow
  • CWR Ward
Paper

Abstract

A glance along the finance shelves at any bookshop reveals a large number of books that seek to show readers how to ‘make a million’ or ‘beat the market’ with allegedly highly profitable equity trading strategies. This paper investigates whether useful trading strategies can be derived from popular books of investment strategy, with What Works on Wall Street by James P. O'Shaughnessy used as an example. Specifically, we test whether this strategy would have produced a similarly spectacular performance in the UK context as was demonstrated by the author for the US market. As part of our investigation, we highlight a general methodology for determining whether the observed superior performance of a trading rule could be attributed in part or in entirety to data mining. Overall, we find that the O'Shaughnessy rule performs reasonably well in the UK equity market, yielding higher returns than the FTSE All-Share Index, but lower returns than an equally weighted benchmark.

Keywords

equity trading rules bootstrap data mining data snooping investment book London Stock Exchange 

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Copyright information

© Palgrave Macmillan 2001

Authors and Affiliations

  • C Brooks
    • 1
  • W Chow
  • CWR Ward
  1. 1.ISMA Centre, PO Box 242, University of ReadingWhiteknightsUK

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