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- Title
Exploring the Effectiveness of Trailing Stop-Loss Strategies for Individual Investors.
- Authors
Dolvin, Steven; Foltice, Bryan
- Abstract
The authors empirically examine the effectiveness of trailing stop-loss (TSL) strategies in generating excess returns for individual investors. Using data from January 1, 2001, to December 31, 2021, the authors analyze four popular US-based market-level exchangetraded funds (ETFs) and nine sector-level ETFs. Using various fixed percentages and historical volatility levels to determine the TSL threshold rule (i.e., the downside stop price at which investors would exit a position), the authors find that low thresholds (i.e., narrower downside stop prices) yield significantly lower excess returns, and higher thresholds, typically between 1.0 and 1.5 standard deviations, provide significantly higher excess returns. Moreover, the vast majority of the TSL trading strategies post positive excess returns even after including transaction costs and systematic risks, regardless of the threshold level.
- Publication
Journal of Beta Investment Strategies, 2023, Vol 14, Issue 1, p29
- ISSN
2771-6511
- Publication type
Academic Journal
- DOI
10.3905/jbis.2023.1.025