Analysis of S&P 500 stocks: Long-term vs short-term investment

Abstract

This paper is concerned with analyzing the stocks in the Standard & Poors 500 Index that potentially yield high returns. To achieve this goal, historical stock prices and their corresponding simple moving averages are used together to capture the stock trend directions. When the time series of the stock crosses over its corresponding simple moving average line from below (or above), it indicates an up (or down) trend signal and a buy (or sell) is initiated. A trading strategy consisting of these buying and selling indicators is implemented. Simple moving averages of various lengths are constructed and employed in order to maximize the return for each stock. The results suggest that long-term trading can potentially yield high returns and short-term trading generally perform poorly.