Technical Trading Rules, Loss Avoidance, and the Business Cycle

We show that simple technical trading rule (TTR) strategies substantially reduce investment left tail risk. An investor following a TTR strategy can also avoid a high percentage of extremely negative returns. This percentage increases substantially during recessions. Interestingly, tail risk reduction does not come at a cost of lower performance – risk adjusted returns of TTR strategies are in fact higher than those of a passive buy-and-hold strategy. Our findings are robust to changes in trading strategy specifications. They hold in 38 international equity markets and survive a reality check bootstrap