A generalized moving average convergence/divergence for testing semi-strong market efficiency

Abstract

We propose a generalized version of the moving average converge divergence(MACD) indicator widely employed in the technical analysis and trading of financial markets. By assuming amartingale modelwith drift for prices, as well as for their transformed values, we propose a test statistic for the local drift and derive its main theoretical properties. The semi-strong market efficiency hypothesis is assessed through a bootstrap test. We conclude by applying the indicator to monitor the crude oil prices over a 6 years period.