vol3-no1-3

Journal of Economics and Financial Analysis, Vol:3, No:1 (2019) 47-70


Measuring Predictability of Oil and Gas Stock Returns and Performance of Moving Average Trading Rules


Muhammad Surajo SANUSI*a, Farooq AHMADb

a Department of Accounting and Finance, Birmingham City University, United Kingdom

b Department of Accounting and Finance, Robert Gordon University, United Kingdom


Abstract

The paper re-examines whether investors can predict oil and gas stock prices for abnormal returns using autocorrelation-based trading and filter rules and moving average strategies. In this paper, short and long lengths moving averages are employed and their performances are measured against the returns from simple buy and hold investment strategy. As a result, the paper finds that employed trading rules do not indicate that investors can make abnormal returns in oil and gas stocks. Moreover, the performances of short and long moving averages in predicting abnormal returns also do not suggest a conclusive evidence that any of the moving averages can result in more returns compared to others.

Keywords: Trading and Filter Rules; Moving Average Trading Rule; Buy and Hold Investment Strategy; Oil and Gas Stock Returns.

JEL Classification: G100, G120.



* Corresponding author.

E-mail addresses: [email protected] (M.S.Sanusi), [email protected] (F.Ahmad).


  1. Introduction

    Technical trading rules are employed by traders to generate buy or sell signals on their investment based on the behaviour of past stock prices. According to Fama (1970), the theory of efficient market hypothesis postulates that trading rules cannot provide any credible signals to the advantage of investors because prices already reflect all relevant information. However, the popularity of the trading rules in the marketplace suggests the possibility of their power in predicting abnormal returns. The presence of serial correlation in return series could be an indication of non-randomness of stock returns, but it is not enough to classify a market as inefficient. A market can only be classified as inefficient if past autocorrelation in prices can be used by traders to earn an abnormal profit after considering transaction costs. Oil and gas industry remains one of the important sectors of every economy, and it will be interesting to see if investors can use technical trading rules to earn more than risk-adjusted returns in the oil and gas stocks.


  2. Literature Review

    Brock et al. (1992) have tested the performance of simple trading rules using a moving average on the Dow Jones index ranging from 1897 to 1986. Their results showed the possibility of realising an abnormal profit from the movement of stock prices. It proves the usefulness of technical trading rules and their predictive ability regarding trading in stocks. Hudson et al (1996) did a similar study on the UK data employing the methodology used in Brock et al (1992). Their results also showed the predictive power of trading rules, but concluded that it was difficult to make any abnormal profit due to high transaction costs in the market. Mills (1997) investigated the predictive ability of simple trading rules, moving average, on the FTSE 30 share index for the period 1935-1994, and reported higher returns as compared to buy and hold investment strategy for most of the study period. It was noted that trading rules performed well in the period prior to 1980. Overall, the results of these studies were consistent with that of Brock et al (1992).

    Ratner and Leal (1999) applied technical trading strategies to the emerging markets of Latin America and Asia. They also used variable length moving average (VMA) trading rules to ten emerging markets over the period 1982 to 1995. Total trading returns after transaction costs were compared with returns from a buy and hold strategy. Trading rules performed well in Mexico, Thailand, and Taiwan only. The study used inflation-adjusted stock returns instead of the nominal returns used by many scholars. Gunasekarage and Power (2001) tested and compared the profitability of moving average trading rules in South-Asian markets of Bombay, Colombo, Dhaka and Karachi Stock Exchanges. The findings of their study suggested a strong predictive ability of trading rules except for the Bombay Stock Exchange. Yu et al. (2003), Park and Irwin (2007), Loh (2007), Sehgal and Gupta (2005) also found evidence of predictive ability and profitability of trading rules in various Asian markets.

    Coutts and Cheung (2000) investigated whether the moving average oscillator and the trading range break-out trading rules have predictive power in the Hang Seng Index of the Hong Kong Stock Exchange for the period 1985 to 1997. Although, the trading range break-out rule was found to be stronger than the moving average oscillator, both rules would fail to provide an abnormal profit if transaction costs are taking into consideration. Milionis and Papanagiotou (2008) have conducted a study on the variation of the moving average trading rules performances based on the length of longer moving average periods. The analysis was carried out on the NYSE and the Athens Stock Exchange daily data for the period April 1993 to April 2005. Significant variability of performance between the different lengths of the moving average trading rules was observed. Shorter length moving averages had enhanced-performance compared to longer length moving average trading rules. It was also discovered that seventy-five percent of the trading signals by moving average trading rules are not realistic.


  3. Methodology and Results

    This study will apply trading and filter-based rules that have been developed to trade in the presence of autocorrelation or persistence in the returns of oil and gas stocks in the UK market. It will also employ various combinations of moving averages to see the performances of these strategies as compared to buy and hold returns. The results from the moving averages trading rules are subjected to further tests to assess their individual performance in predicting the oil and gas related stock returns.

    1. Trading and Filter Rules

      A trading and filter rule strategy has been developed to exploit the presence of autocorrelation (or persistence) in stock returns in order to assess the power of the strategies in predicting the oil and gas stock returns. For example, if there is a high positive autocorrelation at the first lag in the past data, and if this behaviour is expected to continue in the future, investors can make a simple trading rule to exploit this persistence in returns. Here, the trading strategy would be to buy any stock that has a given positive return, and sell the stock if the return changes to negative, investing the proceeds (cash) in a risk-free asset such as treasury bills. The trading rule will be tested using a hypothetical initial investment of £1, and the closing value of the investment over the sample period is given by:

      investment-trading-rule

      where JT(Active) is closing value of £1 hypothetical investment using the trading rule; e is Exponential (or investment); rt and rft are return and risk-free rate of return at period t respectively. The a is as following.

      investment-alpha-return

      This shows that whenever rt-1 is positive, there will be no investment in the risk-free asset because of the buy signal (investment in stock), and if rt-1 is negative there will be an investment in the risk-free asset because of the sell signal (cash from sale). The previous action will be maintained (no present action) if rt-1 is equalled to zero. The strategy generates a high number of trading transactions in each stock over the sample period. In order to reduce the trading transactions, filters to return thresholds are introduced to the trading rule (see also the work of Alexander (1961)), where signals are only generated if return limits are reached. The filters used are 0.05%, 0.1%, 0.15%, 0.2%, 0.3%, 0.4%, 0.5%, 0.6%, 0.7%, 0.8%, 0.9%, and 1%. In each of the filters, the number of trading transactions, trading profit, and break-even cost are calculated for assessment.

      The trading profit from the employed trading strategy or rule is compared with that from an ordinary buy and hold strategy to assess the power of the trading rule and weak form market efficiency. The buy and hold investment strategy is represented by the ‘JT(Static)’ which is given as:

      buy-hold-investment

      where JT(Static) is buy and hold investment strategy and other parameters are as defined above.

      Break-even cost is also calculated by dividing the difference between the terminal values of JT(Active) and JT(Static) by the number of trading transactions. For any trading profit to be considered higher than that of the buy and hold strategy, the break-even cost must be higher than the relevant transaction cost. In other words, transaction cost must not exceed the break-even cost which is given by:

      break-even-cost-investment

      where BC stands for the break-even cost; ln represents the natural logarithm and s indicates the number of trading transactions. The strategy is employed on the FTSE indices and all of the oil and gas stock series for three years from January 2014 to December 2016. Stocks that have less than three years series are excluded from the analysis and the results are presented in Table 1.

      Table 1. Trading and Filter Rules based on Autocorrelation Persistence for Indexes/Series


      JT

      (Static)

      JT

      (Active)

      0.0005

      0.001

      0.0015

      0.002

      0.003

      0.004

      0.005

      0.006

      0.007

      0.008

      0.009

      0.01

      FTSE All-

      share

      Index

      TV

      1.1017

      1.1843

      1.1802

      1.1273

      1.0749

      1.1209

      1.1918

      1.2143

      1.166

      1.2142

      1.2217

      1.1637

      1.0576

      1.105

      BC


      0.0002

      0.0002

      0.0001

      -0.0001

      0.0001

      0.0003

      0.0004

      0.0003

      0.0005

      0.0006

      0.0003

      -0.0003

      0.0001

      TR


      375

      351

      339

      331

      317

      282

      245

      217

      187

      169

      157

      145

      129

      FTSE 100

      Share

      Index

      TV

      1.073

      1.0683

      1.0486

      1.0939

      1.1277

      1.072

      1.0654

      1.2109

      1.0899

      1.0899

      1.1249

      1.1072

      1.1248

      1.1113

      BC


      -0.0001

      -0.0001

      0.0001

      0.0002

      -0.0001

      -0.0001

      0.0005

      0.0001

      0.0001

      0.0003

      0.0002

      0.0003

      0.0003

      TR


      381

      365

      341

      325

      315

      292

      247

      233

      203

      179

      163

      151

      135

      FTSE Oil and Gas Index

      TV

      0.9126

      0.9862

      0.9397

      0.9543

      1.02

      1.0358

      1.0326

      1.026

      1.0882

      1.083

      1.1611

      1.1244

      1.0543

      1.0335

      BC


      0.0002

      0.0001

      0.0001

      0.0003

      0.0004

      0.0004

      0.0004

      0.0007

      0.0007

      0.0011

      0.0011

      0.0008

      0.0007

      TR


      382

      376

      364

      345

      331

      299

      289

      260

      234

      214

      197

      188

      174

      FTSE Oil and Gas Producer

      Index

      TV

      0.9004

      0.9771

      0.9738

      0.9772

      1.0387

      1.0238

      1.0297

      1.0174

      1.0493

      1.0842

      1.107

      1.0865

      1.0406

      1.0411

      BC


      0.0002

      0.0002

      0.0002

      0.0004

      0.0004

      0.0004

      0.0004

      0.0006

      0.0008

      0.0009

      0.0009

      0.0008

      0.0008

      TR


      384

      372

      362

      344

      333

      303

      291

      264

      238

      220

      199

      193

      172

      FTSE Aim SS

      Oil and Gas

      TV

      0.9223

      1.8469

      1.726

      1.6312

      1.689

      1.808

      1.6885

      1.6603

      1.6851

      1.5706

      1.4936

      1.3111

      1.5105

      1.7699

      BC


      0.0019

      0.0018

      0.0017

      0.0019

      0.0023

      0.0022

      0.0023

      0.0026

      0.0025

      0.0025

      0.0019

      0.003

      0.0044

      TR


      363

      347

      333

      311

      289

      269

      251

      231

      209

      193

      183

      163

      147


      TV

      1.2612

      1.2401

      1.2401

      1.2487

      1.3152

      1.4217

      1.3689

      1.3667

      1.3488

      1.2214

      1.1779

      1.1198

      1.1081

      1.0514

      Amec

      BC


      -0.0001

      -0.0001

      -0.0001

      0.0001

      0.0004

      0.0003

      0.0003

      0.0003

      -0.0001

      -0.0003

      -0.0005

      -0.0006

      -0.0009


      TR


      343

      343

      331

      319

      309

      283

      269

      253

      239

      225

      219

      207

      196

      BG

      Group

      TV

      0.8652

      0.8008

      0.8008

      0.8128

      0.8389

      0.8503

      0.8305

      0.9749

      0.9040

      0.8362

      0.8297

      0.7664

      0.7608

      0.7971

      BC


      -0.0002

      -0.0002

      -0.0002

      -0.0001

      -0.0001

      -0.0001

      0.0004

      0.0002

      -0.0001

      -0.0002

      -0.0005

      -0.0006

      -0.0004

      TR


      368

      368

      352

      342

      336

      316

      292

      272

      260

      244

      230

      220

      206


      TV

      0.6855

      0.7692

      0.7692

      0.7692

      0.7607

      0.7767

      0.8183

      0.764

      0.6573

      0.6652

      0.6932

      0.6808

      0.7107

      0.7775

      BP

      BC


      0.0003

      0.0003

      0.0003

      0.0003

      0.0004

      0.0005

      0.0004

      -0.0001

      -0.0001

      0.0001

      -0.0001

      0.0002

      0.0005


      TR


      358

      358

      358

      358

      352

      330

      310

      308

      292

      274

      258

      246

      232

      Cairn Energy

      TV

      0.6709

      0.8161

      0.8161

      0.8161

      0.8099

      0.8481

      0.8617

      0.7977

      0.8616

      0.9024

      1.0168

      0.9547

      0.9965

      0.8459

      BC


      0.0005

      0.0005

      0.0005

      0.0005

      0.0007

      0.0007

      0.0005

      0.0008

      0.001

      0.0016

      0.0014

      0.0017

      0.001

      TR


      365

      365

      365

      363

      349

      341

      327

      305

      288

      264

      254

      238

      230

      Dragon Oil

      TV

      1.3544

      2.059

      2.059

      2.059

      1.9036

      1.7404

      1.6645

      1.6783

      1.3546

      1.3791

      1.2927

      1.171

      1.1598

      1.1157

      BC


      0.0013

      0.0013

      0.0013

      0.001

      0.0008

      0.0007

      0.0008

      0.0001

      0.0001

      -0.0002

      -0.0006

      -0.0008

      -0.001

      TR


      333

      333

      333

      325

      311

      291

      273

      265

      250

      244

      230

      208

      198

      Fortune Oil

      TV

      1.5714

      0.0057

      0.0057

      0.0057

      0.0057

      0.0057

      0.0057

      0.0057

      0.0057

      0.0057

      0.0057

      0.0057

      0.0057

      0.0057

      BC


      -0.0435

      -0.0435

      -0.0436

      -0.0435

      -0.0435

      -0.0435

      -0.0435

      -0.0436

      -0.0435

      -0.0435

      -0.0435

      -0.0436

      -0.0435

      TR


      129

      129

      129

      129

      129

      129

      129

      129

      129

      129

      129

      129

      129


      TV

      1.3221

      1.3677

      1.3677

      1.4232

      1.3466

      1.5176

      1.4453

      1.499

      1.6019

      1.5532

      1.5387

      1.7335

      1.6948

      1.4314

      Hunting

      BC


      0.0001

      0.0001

      0.0002

      0.0001

      0.0004

      0.0003

      0.0004

      0.0007

      0.0006

      0.0006

      0.0012

      0.0011

      0.0004


      TR


      373

      373

      359

      353

      337

      321

      299

      273

      259

      251

      229

      221

      217

      Premier Oil

      TV

      1.106

      0.7045

      0.7045

      0.7045

      0.6755

      0.6872

      0.5751

      0.6479

      0.7333

      0.8019

      0.7731

      0.8941

      0.9097

      0.8246

      BC


      -0.0012

      -0.0012

      -0.0012

      -0.0014

      -0.0014

      -0.002

      -0.0017

      -0.0014

      -0.0012

      -0.0014

      -0.0009

      -0.0009

      -0.0015

      TR


      371

      371

      371

      363

      349

      333

      309

      287

      267

      249

      227

      211

      201

      Royal Dutch

      Shell-A

      TV

      1.0385

      1.1358

      1.0996

      1.1004

      1.1071

      1.1127

      1.0821

      1.0685

      1.1643

      1.1474

      1.0687

      1.046

      1.2351

      1.1462

      BC


      0.0002

      0.0002

      0.0002

      0.0002

      0.0002

      0.0001

      0.0001

      0.0005

      0.0005

      0.0001

      0.0001

      0.0011

      0.0006

      TR


      380

      346

      346

      334

      322

      291

      263

      237

      221

      203

      187

      161

      155

      Royal Dutch

      Shell-B

      TV

      1.1662

      1.1215

      1.1008

      1.0296

      1.0546

      1.0084

      1.0269

      1.1148

      1.2253

      1.1483

      1.2234

      1.2163

      1.1556

      1.1698

      BC


      -0.0001

      -0.0002

      -0.0004

      -0.0003

      -0.0005

      -0.0004

      -0.0002

      0.0002

      -0.0001

      0.0002

      0.0002

      -0.0001

      0.0001

      TR


      367

      361

      355

      339

      317

      293

      267

      243

      223

      199

      177

      169

      155

      Tullow Oil

      TV

      0.9561

      1.2443

      1.2443

      1.224

      1.2347

      1.07

      0.9856

      0.8255

      0.7792

      0.8239

      0.9394

      0.8531

      0.7901

      0.8693

      BC


      0.0007

      0.0007

      0.0007

      0.0007

      0.0003

      0.0001

      -0.0004

      -0.0007

      -0.0005

      -0.0001

      -0.0004

      -0.0007

      -0.0004

      TR


      369

      369

      365

      361

      357

      345

      333

      309

      295

      271

      257

      255

      239


      TV

      0.3077

      0.0092

      0.0092

      0.0092

      0.0092

      0.0092

      0.0092

      0.0092

      0.0092

      0.0092

      0.0092

      0.0092

      0.0092

      0.0092

      Aminex

      BC


      -0.0358

      -0.0358

      -0.0358

      -0.0358

      -0.0358

      -0.0358

      -0.0358

      -0.0358

      -0.0358

      -0.0358

      -0.0358

      -0.0358

      -0.0358


      TR


      98

      98

      98

      98

      98

      98

      98

      98

      98

      98

      98

      98

      98

      JKX Oil and Gas

      TV

      0.2596

      1.2644

      1.2644

      1.2644

      1.2644

      1.2644

      1.3501

      1.2073

      1.1649

      1.1618

      1.1465

      1.1465

      1.0975

      0.9521

      BC


      0.0049

      0.0049

      0.0049

      0.0049

      0.0049

      0.0053

      0.0052

      0.0051

      0.0053

      0.0056

      0.0056

      0.0057

      0.0052

      TR


      321

      321

      321

      321

      321

      311

      297

      295

      283

      267

      267

      255

      249

      Soco Inter- national

      TV

      1.0346

      0.8521

      0.8521

      0.8521

      0.8521

      0.847

      0.8098

      0.986

      0.9559

      1.0091

      1.0509

      0.9242

      0.9438

      0.8928

      BC


      -0.0006

      -0.0006

      -0.0006

      -0.0006

      -0.0006

      -0.0007

      -0.0002

      -0.0003

      -0.0001

      0.0001

      -0.0004

      -0.0004

      -0.0006

      TR


      353

      353

      353

      353

      349

      329

      313

      303

      283

      273

      261

      247

      241

      Wood Group

      TV

      2.284

      1.6436

      1.6436

      1.6759

      1.6631

      1.6235

      1.4991

      1.3401

      1.4423

      1.4525

      1.6917

      1.5042

      1.6311

      1.7665

      BC


      -0.0009

      -0.0009

      -0.0009

      -0.001

      -0.0011

      -0.0014

      -0.0019

      -0.0018

      -0.0019

      -0.0014

      -0.002

      -0.0018

      -0.0015

      TR


      355

      355

      339

      329

      321

      301

      279

      258

      235

      215

      209

      189

      177


      TV

      1.4444

      1.4769

      1.4769

      1.4769

      1.4769

      1.4769

      1.4769

      1.5052

      1.2979

      1.3638

      1.2256

      1.3385

      1.0909

      1.1956

      Afren

      BC


      0.0001

      0.0001

      0.0001

      0.0001

      0.0001

      0.0001

      0.0001

      -0.0004

      -0.0002

      -0.0006

      -0.0003

      -0.0011

      -0.0008


      TR


      315

      315

      315

      315

      315

      315

      311

      305

      285

      281

      267

      259

      241

      Hardy Oil and Gas

      TV

      0.3699

      0.3009

      0.3009

      0.3009

      0.3009

      0.3009

      0.3009

      0.3009

      0.2886

      0.383

      0.3966

      0.38

      0.3956

      0.4068

      BC


      -0.0006

      -0.0006

      -0.0006

      -0.0006

      -0.0006

      -0.0006

      -0.0006

      -0.0007

      0.0001

      0.0002

      0.0001

      0.0002

      0.0003

      TR


      362

      362

      362

      362

      362

      362

      362

      358

      342

      336

      332

      328

      324


      TV

      1.7135

      1.1803

      1.1085

      1.1813

      1.1027

      1.0625

      1.1365

      1.0301

      1.0178

      0.9887

      0.9356

      1.0619

      1.0623

      1.0593

      Petrofac

      BC


      -0.001

      -0.0012

      -0.0011

      -0.0013

      -0.0014

      -0.0013

      -0.0017

      -0.0018

      -0.002

      -0.0023

      -0.002

      -0.0021

      -0.0023


      TR


      365

      361

      351

      339

      331

      311

      303

      291

      275

      261

      235

      225

      207

      Salamander Energy

      TV

      0.786

      1.4185

      1.4185

      1.4185

      1.4185

      1.4185

      1.4185

      1.4354

      1.4463

      1.519

      1.521

      1.337

      1.3098

      1.2538

      BC


      0.0018

      0.0018

      0.0018

      0.0018

      0.0018

      0.0018

      0.0019

      0.0019

      0.0022

      0.0024

      0.002

      0.0021

      0.002

      TR


      329

      329

      329

      329

      329

      329

      323

      313

      297

      271

      260

      248

      238


      TV

      0.5

      0.7235

      0.7235

      0.7235

      0.7348

      0.7451

      0.8392

      1.0267

      1.1096

      0.9859

      0.9628

      0.8847

      0.8305

      0.8132

      Lamprell

      BC


      0.0011

      0.0011

      0.0011

      0.0011

      0.0012

      0.0016

      0.0024

      0.0028

      0.0024

      0.0025

      0.0022

      0.002

      0.0019


      TR


      349

      349

      349

      347

      341

      321

      297

      283

      279

      267

      261

      253

      251

      Endeavor Int. Corp.

      TV

      0.3467

      0.644

      0.644

      0.644

      0.6389

      0.6399

      0.6779

      0.4576

      0.3431

      0.2064

      0.1989

      0.209

      0.2202

      0.2958

      BC


      0.0018

      0.0018

      0.0018

      0.0018

      0.0019

      0.0022

      0.001

      0

      -0.0022

      -0.0026

      -0.0027

      -0.0027

      -0.0011

      TR


      343

      343

      343

      335

      325

      307

      267

      247

      231

      215

      189

      167

      151

      Cadogan Petroleum

      TV

      0.8235

      0.0848

      0.0848

      0.0848

      0.0848

      0.0848

      0.0848

      0.0848

      0.0848

      0.0848

      0.0848

      0.0848

      0.0848

      0.0882

      BC


      -0.0093

      -0.0093

      -0.0093

      -0.0093

      -0.0093

      -0.0093

      -0.0093

      -0.0093

      -0.0093

      -0.0093

      -0.0093

      -0.0093

      -0.0092

      TR


      244

      244

      244

      244

      244

      244

      244

      244

      244

      244

      244

      244

      242

      Heritage Oil

      TV

      0.5369

      1.2469

      1.2469

      1.2469

      1.2469

      1.2166

      1.2077

      1.2343

      1.2152

      0.7997

      0.7628

      0.7413

      0.7283

      0.8525

      BC


      0.0027

      0.0027

      0.0027

      0.0027

      0.0026

      0.0027

      0.0028

      0.0028

      0.0014

      0.0013

      0.0012

      0.0012

      0.0018

      TR


      311

      311

      311

      311

      309

      305

      297

      291

      285

      279

      271

      265

      253


      TV

      1.9403

      3.6933

      3.6933

      3.6933

      2.7518

      2.8494

      2.6795

      2.2808

      2.0159

      2.0635

      2.2498

      2.2096

      2.3077

      2.2371

      Kentz

      BC


      0.0023

      0.0023

      0.0023

      0.0013

      0.0015

      0.0014

      0.0007

      0.0002

      0.0003

      0.0009

      0.0009

      0.0014

      0.0012


      TR


      278

      278

      278

      268

      258

      238

      218

      198

      182

      166

      144

      126

      122

      Exillon Energy

      TV

      0.85

      3.0368

      3.0368

      3.0368

      3.2219

      3.1274

      3.6215

      3.803

      3.3837

      3.3185

      3.2556

      3.0489

      2.8989

      2.673

      BC


      0.0045

      0.0045

      0.0045

      0.0049

      0.0048

      0.0056

      0.0058

      0.0055

      0.0057

      0.0057

      0.0055

      0.0056

      0.0054

      TR


      285

      285

      285

      271

      271

      261

      259

      251

      241

      235

      233

      221

      213

      Notes: TV is terminal value of initial £1 investment. JT(Static) represents the terminal value of investment using buy and hold strategy, whereas JT(Active) represents the terminal value of investment using trading rule without any filter. Subsequent columns present the terminal investments using the trading rules at various filters. BC is the breakeven cost which is a limit that transaction cost must not exceed for profit to be considered as abnormal. TR presents the number of transactions which reduces as filters increase under normal circumstance.


      Table 1 presents the results of trading and filter rules applied to the oil and gas stock returns. Breakeven costs are used to assess whether the generated profit from the technical trading rule is higher than that from the simple buy and hold strategy on the assumption that transaction cost or commission must be paid on every transaction (see notes attached to the Table). It is interesting to note from the results that the breakeven cost per transaction in most of the stock series is very negligible (in some cases negative) which will be lower than transaction costs of trading in these stocks. In that case, the trading profit cannot be higher than that from the simple buy and hold strategy after considering the transaction costs. The application of simple trading rules on the FTSE market indices does not indicate the possibility of earning abnormal returns due to meagre breakeven cost except in the FTSE UK AIM SS Oil and Gas index which has comparatively high breakeven costs, which signifies the possibility of profits from trading rule-based strategies. Dragon Oil, JKX Oil and Gas, Salamander Energy, Endeavor International Corporation, Heritage Oil, Kentz and Exillon Energy also show results similar to that of the FTSE AIM SS Oil and Gas index. The common factor in these observations is the low level of liquidity in these stocks. The very low number of transactions in these stocks will hinder the scope of applying these trading rules due the lack of active buyers and sellers in these stocks.


    2. Moving Average-based strategies

      The moving average trading rule is one of the simplest technical trading rules used by chartists to generate ‘buy’ and ‘sell’ signals based on the history of stock prices. According to Achelis (1995), a simple moving average is calculated as an average of stock prices over a given period ‘t’ and changes over time due to the inclusion of new daily stock prices. He also described the moving average as an agreement or consensus of investors’ expectation over the averaging time. Moving averages could be simple (arithmetic), exponential, triangular, variable and weighted. The difference between the various types of moving average depends on the weight given to the new variable (stock price) added to the moving average. In this study, the simple moving average will be considered which seems to be one of the most prominent trading strategies in the literature.

      Brock et al (1992) employed the simple moving average and trading range break-out to investigate the predictive power of trading rules on the 90-year series of the Dow Jones Industrial Average (DJIA) index. Using the simple moving average, two moving averages of long and short periods were used to generate ‘buy’ and ‘sell’ signals. The strategy signals a ‘buy’ transaction if the short period moving average rises or crosses above the long period moving average and a ‘sell’ transaction if the short period moving average falls or crosses below the long period moving average. The simple moving average adopted by Brock et al (1992) encompasses the variable moving average (VMA) and the fixed moving average (FMA). In the variable moving average (VMA), a day is classified as buy (sell) if the short moving average lies above (below) the long moving average. The fixed moving average designates a buy (sell) signal immediately the short moving average crosses the long moving average from below (above). The use of both short and long period moving averages at the same time was justified by the scholars as an attempt to stabilise any high volatility in the series. Although, various combinations of short and long period moving averages such as 1-200, 2- 200, 5-150 and 1-150 were used in the literature, Brock et al (1992) had emphasised the short and long periods to be S ≤ 5 and L ≥ 50 respectively as the most popular range employed by scholars, as cited by Taylor (2005).

      This paper employs the same moving average (Fixed Moving Average) methodology employed by Brock et al (1992) to test whether an abnormal profit can be obtained from our series that show evidence of serial correlation. The parameters of short and long moving averages and the yardstick for investment decisions (buy and sell) are defined according to the representation of Mills (1998) as follows:

      moving-average-investment-decision

      where St(n) is short period (n) moving average; Lt(m) is long period (m) moving average in which (m>n); and xt is variable at period t which represents stock price in this study.

      Brock et al (1992) tested the significance of the difference between the trading rule and the buy and hold strategy returns using t-statistics defined as:


      buy-and-sell-t-stat-difference

      where ;

      μr = Mean return for the ‘buy’ or ‘sell’ transactions

      μ = Mean return for the buy and hold strategy (mean of the full sample)

      σ2 = Variance of the full sample

      N = Number of full sample

      Nr = Number of signals (days) for the ‘buy’ or ‘sell’ transaction


      buy-minus-sell-t-stat-difference

      where ;

      μb = Mean return for the ‘buy’ transactions

      μs = Mean return for the ‘sell’ transactions

      σ2 = Variance of the full sample

      Nb = Number of signals (days) for the ‘buy’ transactions

      Ns = Number of signals (days) for the ‘sell’ transactions

      The critical values of the t-statistics calculated are used to assess the significance of the difference between the returns generated from the trading rules and the buy and hold investment strategy. If the t-statistics value is greater than its critical value, the difference between the trading rule and the buy and hold returns is assumed to be significant. In simple terms, the null hypothesis that the returns from trading rules (moving averages) are equal to those from the buy and hold strategy will be rejected if the t-statistics value is greater than its critical value. In that case, the trading rules investment strategy can result in an abnormal gain. The number of buy and sell signals (days) are also used to determine whether the market is bullish or bearish. If the ‘buy’ signals (days) are greater than the ‘sell’ signals (days) the market is considered as bullish and bearish if vice versa. The test of significance of the difference between buy and sell mean returns assesses whether the opposing signals (days) are meaningful or not.

      Similarly, t-statistics (and critical values) are used to accept or reject the null hypothesis of equality. Rejection of the null hypothesis will mean that the values (buy and sell mean returns) are significantly different which demonstrates that the signals are meaningful.

      We specifically employed ten combinations of short moving average, long moving average, and zero bandwidth or threshold ranging from (5,10,0) to (5,100,0) as fixed moving averages (FMA) on the FTSE indices and oil and gas stock series for three years from January 2014 to December 2016.

      Table 2. Moving Averages Trading Rules on Daily Returns Series from 2014 to 2016


      Moving Average


      (5,10,0)


      (5,20,0)


      (5,30,0)


      (5,40,0)


      (5,50,0)


      (5,60,0)


      (5,70,0)


      (5,80,0)


      (5,90,0)


      (5,100,0)


      FTSE All Share Index

      Buy Mean

      0.0006

      (0.7263)

      0.0003

      (0.2496)

      0.0002

      (0.1297)

      0.0003

      (0.2287)

      0.0002

      (0.0920)

      0.0003

      (0.2512)

      0.0002

      (0.0976)

      0.0001

      (0.1509)

      0.0001

      (0.0849)

      0.0001

      (0.0077)

      Sell Mean

      0.0005

      (0.4545)

      0.0000

      (0.2181)

      -0.0001

      (-0.2807)

      0.0008

      (0.8424)

      0.0001

      (0.1467)

      0.0002

      (0.0784)

      -0.0001

      (-0.305)

      -0.0004

      (-0.6615)

      -0.0004

      (-0.5858)

      -0.0002

      (-0.4322)

      Buy-Sell

      0.0002

      (0.1983)

      0.0003

      (0.3992)

      0.0003

      (0.3585)

      -0.0005

      (-0.5768)

      0.0002

      (0.2044)

      0.0001

      (0.1224)

      0.0003

      (0.3531)

      0.0004

      (0.4847)

      0.0004

      (0.4816)

      0.0004

      (0.3934)

      Trade Rule

      0.4230

      0.1290

      0.0840

      0.1720

      0.0970

      0.1870

      0.0670

      -0.0740

      -0.0330

      0.1430

      Buy & Hold

      0.1140

      0.1140

      0.1140

      0.1140

      0.1140

      0.1140

      0.1140

      0.1140

      0.1140

      0.1140


      FTSE 100 Share Index

      Buy Mean

      0.0006

      (0.7341)

      0.0002

      (0.1054)

      0.0002

      (0.1526)

      0.0002

      (0.1488)

      0.0002

      (0.1527)

      0.0002

      (0.1276)

      0.0002

      (0.1508)

      0.0001

      (0.0465)

      0.0001

      (0.0583)

      0.0001

      (0.0209)

      Sell Mean

      0.0005

      (0.5383)

      -0.0001

      (-0.3007)

      -0.0001

      (-0.2404)

      0.0001

      (0.0013)

      0.0001

      (0.0454)

      0.0000

      (0.1313)

      0 .0000

      (0.1224)

      -0.0002

      (-0.3856)

      -0.0004

      (-0.5978)

      -0.0002

      (-0.3993)

      Buy-Sell

      0.0001

      (0.1379)

      0.0003

      (0.3557)

      0.0003

      (0.3400)

      0.0001

      (0.1185)

      0.0001

      (0.0784)

      0.0002

      (0.2180)

      0.0002

      (0.2273)

      0.0003

      (0.3133)

      0.0005

      (0.5070)

      0.0003

      (0.3509)

      Trade Rule

      0.4250

      0.0380

      0.0910

      0.1170

      0.1290

      0.1050

      0.0930

      -0.0190

      -0.0550

      -0.0100

      Buy & Hold

      0.0860

      0.0860

      0.0860

      0.0860

      0.0860

      0.0860

      0.0860

      0.0860

      0.0860

      0.0860


      FTSE Oil and Gas Index

      Buy Mean

      0.0009

      (1.2045)

      0.0006

      (0.8866)

      0.0004

      (0.6501)

      0.0000

      (0.1293)

      0.0001

      (-0.2395)

      0.0003

      (0.4247)

      0.0004

      (0.5780)

      0.0005

      (0.7474)

      0.0005

      (0.7045)

      0.0004

      (0.6148)

      Sell Mean

      0.0012

      (1.5380)

      0.0009

      (1.0893)

      0.0007

      (0.9122)

      0.0002

      (0.3525)

      0.0004

      (0.5430)

      0.0006

      (0.7506)

      0.0006

      (0.7868)

      0.0007

      (0.9550)

      0.0005

      (0.5534)

      0.0004

      (0.4680)

      Buy-Sell

      -0.0003

      (-0.318)

      -0.0002

      (-0.2286)

      -0.0003

      (-0.2786)

      -0.0002

      (-0.2107)

      -0.0003

      (-0.278)

      -0.0003

      (-0.3069)

      -0.0002

      (-0.2096)

      -0.0002

      (-0.2036)

      0.0000

      (0.0300)

      0.0001

      (0.0465)

      Trade Rule

      0.7980

      0.5500

      0.4130

      0.0830

      0.1690

      0.2840

      0.3410

      0.4420

      0.2950

      0.2460

      Buy & Hold

      -0.0611

      -0.0611

      -0.0611

      -0.0611

      -0.0611

      -0.0611

      -0.0611

      -0.0611

      -0.0611

      -0.0611

      FTSE Oil&Gas Producers

      Buy Mean

      0.0009

      (-1.1985)

      0.0007

      (-0.9810)

      0.0005

      (-0.6962)

      0.0000

      (0.1206)

      0.0002

      (0.3947)

      0.0003

      (0.4385)

      0.0004

      (0.6272)

      0.0005

      (0.7588)

      0.0006

      (0.7953)

      0.0005

      (0.6872)

      Sell Mean

      0.0012

      (1.5820)

      0.0010

      (1.2399)

      0.0008

      (0.9936)

      0.0003

      (0.4027)

      0.0006

      (0.7464)

      0.0006

      (0.7963)

      0.0007

      (0.8733)

      0.0008

      (0.9948)

      0.0005

      (0.6404)

      0.0005

      (0.5606)

      Buy-Sell

      -0.0003

      (-0.3657)

      -0.0003

      (-0.2888)

      -0.0003

      (-0.3079)

      -0.0003

      (-0.2622)

      -0.0003

      (-0.3246)

      -0.0003

      (-0.3324)

      -0.0002

      (-0.2419)

      -0.0002

      (-0.2272)

      0.0000

      (0.0264)

      0.0000

      (0.0192)

      Trade Rule

      0.7960

      0.6060

      0.4390

      0.0810

      0.2630

      0.2900

      0.3700

      0.4450

      0.3320

      0.2790

      Buy & Hold

      -0.0738

      -0.0738

      -0.0738

      -0.0738

      -0.0738

      -0.0738

      -0.0738

      -0.0738

      -0.0738

      -0.0738

      FTSE AIM SS Oil & Gas

      Buy Mean

      0.0016

      (1.5868)

      0.0011

      (1.0293)

      0.0012

      (1.1428)

      0.0009

      (0.8890)

      0.0015

      (1.4212)

      0.0017

      (1.5332)

      0.0015

      (1.3860)

      0.0012

      (1.0923)

      0.0010

      (0.8860)

      0.0016

      (1.4598)

      Sell Mean

      0.0019*

      (1.8613)

      0.0012

      (1.1613)

      0.0012

      (1.219)

      0.0010

      (1.0036)

      0.0016

      (1.5284)

      0.0015

      (1.4391)

      0.0013

      (1.2687)

      0.0010

      (1.0237)

      0.0010

      (1.0231)

      0.0014

      (1.4215)

      Buy-Sell

      -0.0003

      (-0.2409)

      -0.0001

      (-0.1066)

      0.0000

      (0.0363)

      -0.0001

      (-0.0846)

      -0.0001

      (-0.0538)

      0.0002

      (0.1670)

      0.0003

      (0.1976)

      0.0002

      (0.1346)

      -0.0001

      (-0.0497)

      0.0002

      (0.1478)

      Trade Rule

      1.3500

      0.8350

      0.8940

      0.7090

      1.1100

      1.0800

      0.9660

      0.7650

      0.6910

      1.0400

      Buy & Hold

      -0.0280

      -0.0280

      -0.0280

      -0.0280

      -0.0280

      -0.0280

      -0.0280

      -0.0280

      -0.0280

      -0.0280

      AMEC

      Buy Mean

      0.0009

      (0.5988)

      0.0007

      (0.3865)

      0.0007

      (0.4080)

      0.0009

      (0.5760)

      0.0012

      (0.7979)

      0.0007

      (0.3961)

      0.0012

      (0.8157)

      0.0010

      (0.6107)

      0.0009

      (0.5285)

      0.0007

      (0.4070)

      Sell Mean

      0.0004

      (0.0996)

      0.0002

      (0.1077)

      0.0003

      (0.0417)

      0.0004

      (0.0931)

      0.0008

      (0.3965)

      0.0003

      (0.0169)

      0.0010

      (0.5867)

      0.0006

      (0.2377)

      0.0003

      (0.0120)

      0.0001

      (0.1472)

      Buy-Sell

      0.0005

      (0.3950)

      0.0005

      (0.4119)

      0.0005

      (0.3651)

      0.0005

      (0.3794)

      0.0004

      (0.2771)

      0.0004

      (0.3244)

      0.0001

      (0.1029)

      0.0004

      (0.2694)

      0.0006

      (0.4274)

      0.0006

      (0.4498)

      Trade Rule

      0.5400

      0.3700

      0.4000

      0.5200

      0.7300

      0.4000

      0.7800

      0.5600

      0.4300

      0.3400

      Buy & Hold

      0.2400

      0.2400

      0.2400

      0.2400

      0.2400

      0.2400

      0.2400

      0.2400

      0.2400

      0.2400

      BG GROUP

      Buy Mean

      0.0004

      (0.4418)

      0.0000

      (0.1379)

      0.0001

      (0.1760)

      0.0003

      (0.3674)

      0.0002

      (0.2843)

      0.0000

      (0.1221)

      0.0003

      (0.3902)

      0.0005

      (0.5061)

      0.0005

      (0.5033)

      0.0007

      (0.7074)

      Sell Mean

      0.0008

      (0.7527)

      0.0004

      (0.4603)

      0.0005

      (0.5437)

      0.0008

      (0.7285)

      0.0006

      (0.6276)

      0.0004

      (0.4516)

      0.0008

      (0.7445)

      0.0009

      (0.7893)

      0.0009

      (0.7810)

      0.0011

      (0.9357)

      Buy-Sell

      -0.0004

      (-0.2867)

      -0.0004

      (-0.2934)

      -0.0005

      (-0.3286)

      -0.0005

      (-0.3282)

      -0.0004

      (-0.3124)

      -0.0004

      (-0.2957)

      -0.0004

      (-0.3128)

      -0.0004

      (-0.2676)

      -0.0004

      (-0.2588)

      -0.0004

      (-0.2351)

      Trade Rule

      0.4250

      0.1570

      0.2130

      0.3760

      0.2910

      0.1450

      0.3880

      0.4350

      0.4310

      0.5520

      Buy & Hold

      -0.1020

      -0.1020

      -0.1020

      -0.1020

      -0.1020

      -0.1020

      -0.1020

      -0.1020

      -0.1020

      -0.1020


      BP

      Buy Mean

      0.0007

      (0.9566)

      0.0006

      (0.9090)

      0.0006

      (0.9130)

      0.0001

      (0.4961)

      0.0005

      (0.8243)

      0.0005

      (0.8668)

      0.0005

      (0.8569)

      0.0004

      (0.7674)

      0.0003

      (0.6455)

      0.0001

      (0.4668)

      Sell Mean

      0.0014*

      (1.7170)

      0.0015*

      (1.6688)

      0.0017*

      (1.7988)

      0.0011

      (1.3577)

      0.0017*

      (1.8063)

      0.0016*

      (1.6956)

      0.0015*

      (1.6512)

      0.0013

      (1.5503)

      0.0003

      (0.5895)

      0.0000

      (0.3141)

      Buy-Sell

      -0.0007

      (-0.5351)

      -0.0009

      (-0.6821)

      -0.0011

      (-0.8214)

      -0.0010

      (-0.7666)

      -0.0012

      (-0.8571)

      -0.0010

      (-0.7379)

      -0.0009

      (-0.6806)

      -0.0009

      (-0.6608)

      0.0000

      (0.0067)

      0.0002

      (0.1020)

      Trade Rule

      0.8430

      0.7500

      0.791

      0.438

      0.746

      0.716

      0.702

      0.628

      0.188

      0.024

      Buy & Hold

      -0.3440

      -0.3440

      -0.3440

      -0.3440

      -0.3440

      -0.3440

      -0.3440

      -0.3440

      -0.3440

      -0.3440


      CAIRN ENERGY

      Buy Mean

      -0.0002

      (-0.2216)

      -0.0002

      (-0.1654)

      0.0004

      (0.6439)

      0.0000

      (0.3163)

      -0.0007

      (-0.1530)

      -0.0001

      (-0.2174)

      -0.0007

      (-0.1827)

      -0.0004

      (-0.0445)

      -0.0008

      (-0.2168)

      -0.0012

      (-0.4465)

      Sell Mean

      0.0009

      (1.0491)

      0.0007

      (0.9002)

      0.0013

      (1.3587)

      0.0009

      (1.0994)

      0.0008

      (0.9749)

      0.0011

      (1.2237)

      0.0007

      (0.9099)

      0.0009

      (1.0608)

      0.0012

      (1.2219)

      0.0009

      (1.0363)

      Buy-Sell

      -0.0011

      (-0.6977)

      -0.0010

      (-0.6212)

      -0.0008

      (-0.5357)

      -0.0009

      (-0.5873)

      -0.0015

      (-0.8723)

      -0.0012

      (-0.7317)

      -0.0014

      (-0.8775)

      -0.0013

      (-0.8188)

      -0.0020

      (-1.1083)

      -0.0021

      (-1.1689)

      Trade Rule

      0.3080

      0.2000

      0.6860

      0.4110

      0.1720

      0.4440

      0.0950

      0.2450

      0.2550

      0.0870

      Buy & Hold

      -0.3520

      -0.3520

      -0.3520

      -0.3520

      -0.3520

      -0.3520

      -0.3520

      -0.3520

      -0.3520

      -0.3520


      DRAGON OIL

      Buy Mean

      0.0012

      (0.6020)

      0.0006

      (0.1065)

      0.0009

      (0.3220)

      0.0006

      (0.0716)

      0.0008

      (0.2842)

      0.0007

      (0.1522)

      0.0004

      (0.0730)

      0.0001

      (0.2866)

      0.0002

      (0.1954)

      0.0005

      (0.018)

      Sell Mean

      0.0008

      (0.2806)

      0.0000

      (0.3322)

      0.0006

      (0.0778)

      0.0002

      (0.2086)

      0.0004

      (0.0075)

      0.0000

      (0.3003)

      -0.0003

      (-0.5552)

      -0.0006

      (-0.7757)

      -0.0004

      (-0.6652)

      -0.0002

      (-0.4435)

      Buy-Sell

      0.0004

      (0.2442)

      0.0006

      (0.3827)

      0.0003

      (0.1985)

      0.0004

      (0.2411)

      0.0004

      (0.2463)

      0.0006

      (0.3838)

      0.0006

      (0.4127)

      0.0007

      (0.4176)

      0.0006

      (0.3974)

      0.0007

      (0.3971)

      Trade Rule

      0.7940

      0.2490

      0.5160

      0.2640

      0.4450

      0.2420

      0.0190

      -0.1690

      -0.0770

      0.1140

      Buy & Hold

      0.3570

      0.3570

      0.3570

      0.3570

      0.3570

      0.3570

      0.3570

      0.3570

      0.3570

      0.3570

      FORTUNE OIL

      Buy Mean

      0.0001

      (0.0585)

      0.0025

      (0.6320)

      0.0015

      (0.3433)

      0.0022

      (0.4924)

      0.0013

      (0.2866)

      0.0011

      (0.2315)

      0.0009

      (0.1716)

      0.0010

      (0.1936)

      0.0017

      (0.3950)

      0.0016

      (0.3855)

      Sell Mean

      -0.0012

      (-0.3934)

      0.0015

      (0.3786)

      0.0002

      (0.0383)

      0.0003

      (0.0200)

      0.0001

      (0.0493)

      0.0001

      (0.0688)

      -0.0002

      (-0.147)

      -0.0002

      (-0.1626)

      0.0004

      (0.0482)

      0.0005

      (0.0515)

      Buy-Sell

      0.0013

      (0.3292)

      0.0009

      (0.2388)

      0.0014

      (0.3417)

      0.0018

      (0.4440)

      0.0012

      (0.2943)

      0.0010

      (0.2572)

      0.0011

      (0.2720)

      0.0012

      (0.3007)

      0.0012

      (0.2994)

      0.0012

      (0.2849)

      Trade Rule

      -0.2380

      1.3800

      0.5000

      0.6850

      0.4590

      0.3980

      0.2080

      0.1620

      0.6650

      0.6650

      Buy & Hold

      0.2231

      0.2231

      0.2231

      0.2231

      0.2231

      0.2231

      0.2231

      0.2231

      0.2231

      0.2231

      HUNTING

      Buy Mean

      0.0012

      (0.5855)

      0.0017

      (0.9304)

      0.0015

      (0.8573)

      0.0013

      (0.6755)

      0.0012

      (0.5825)

      0.0010

      (0.4546)

      0.0008

      (0.2948)

      0.0010

      (0.4153)

      0.0006

      (0.1579)

      0.0009

      (0.3499)

      Sell Mean

      0.0003

      (0.0723)

      0.0010

      (0.4095)

      0.0009

      (0.3698)

      0.0009

      (0.3519)

      0.0007

      (0.2251)

      0.0005

      (0.0534)

      0.0002

      (0.1490)

      0.0004

      (0.0052)

      -0.0006

      (-0.6158)

      -0.0002

      (-0.3510)

      Buy-Sell

      0.0009

      (0.5616)

      0.0007

      (0.4300)

      0.0006

      (0.3768)

      0.0004

      (0.2331)

      0.0004

      (0.2601)

      0.0005

      (0.3116)

      0.0006

      (0.3679)

      0.0006

      (0.3249)

      0.0012

      (0.6756)

      0.0011

      (0.5815)

      Trade Rule

      0.5770

      1.0000

      0.9560

      0.8110

      0.7040

      0.5550

      0.3710

      0.5070

      0.0940

      0.2920

      Buy & Hold

      0.3060

      0.3060

      0.3060

      0.3060

      0.3060

      0.3060

      0.3060

      0.3060

      0.3060

      0.3060

      PREMIER OIL

      Buy Mean

      0.0020

      (1.4561)

      0.0018

      (1.2679)

      0.0011

      (0.6977)

      0.0012

      (0.7759)

      0.0016

      (1.0162)

      0.0015

      (0.9774)

      0.0013

      (0.7980)

      0.0012

      (0.7639)

      0.0011

      (0.6574)

      0.0010

      (0.5777)

      Sell Mean

      0.0020

      (1.3805)

      0.0012

      (0.7930)

      0.0007

      (0.3395)

      0.0010

      (0.5909)

      0.0011

      (0.6539)

      0.0011

      (0.6710)

      0.0008

      (0.4440)

      0.0010

      (0.5740)

      0.0008

      (0.4391)

      0.0006

      (0.2328)

      Buy-Sell

      0.0000

      (0.0320)

      0.0006

      (0.4019)

      0.0004

      (0.2898)

      0.0001

      (0.0985)

      0.0005

      (0.3148)

      0.0004

      (0.2490)

      0.0004

      (0.2776)

      0.0002

      (0.1207)

      0.0002

      (0.1559)

      0.0004

      (0.2776)

      Trade Rule

      1.5400

      1.1500

      0.6800

      0.8300

      0.9100

      0.9050

      0.7290

      0.7690

      0.6630

      0.5320

      Buy & Hold

      0.1970

      0.1970

      0.1970

      0.1970

      0.1970

      0.1970

      0.1970

      0.1970

      0.1970

      0.1970

      ROYAL DUTCH SHELL-B

      Buy Mean

      0.0010

      (0.9722)

      0.0008

      (0.7713)

      0.0005

      (0.2848)

      0.0005

      (0.2835)

      0.0003

      (0.0511)

      0.0005

      (0.3406)

      0.0005

      (0.3417)

      0.0005

      (0.3051)

      0.0003

      (0.1194)

      0.0005

      (0.2688)

      Sell Mean

      0.0005

      (0.2891)

      0.0003

      (0.1108)

      -0.0001

      (-0.4314)

      -0.0001

      (-0.3286)

      -0.0003

      (-0.5670)

      -0.0001

      (-0.3260)

      0.0000

      (0.2420)

      0.0000

      (0.2538)

      -0.0002

      (-0.4785)

      -0.0002

      (-0.4590)

      Buy-Sell

      0.0005

      (0.5525)

      0.0005

      (0.5384)

      0.0006

      (0.6188)

      0.0005

      (0.5252)

      0.0005

      (0.5373)

      0.0006

      (0.5649)

      0.0005

      (0.4937)

      0.0005

      (0.4737)

      0.0005

      (0.5140)

      0.0007

      (0.6126)

      Trade Rule

      0.5770

      0.4610

      0.1480

      0.1730

      0.0190

      0.1760

      0.1970

      0.1690

      0.0640

      0.1170

      Buy & Hold

      0.1830

      0.1830

      0.1830

      0.1830

      0.1830

      0.1830

      0.1830

      0.1830

      0.1830

      0.1830

      TULLOW OIL

      Buy Mean

      0.0009

      (0.6719)

      0.0005

      (0.4303)

      0.0005

      (0.4436)

      0.0003

      (0.2870)

      0.0002

      (0.1931)

      0.0005

      (0.4180)

      0.0002

      (0.1598)

      -0.0002

      (-0.1125)

      0.0000

      (0.0072)

      -0.0003

      (-0.1888)

      Sell Mean

      0.0011

      (0.8539)

      0.0005

      (0.3627)

      0.0006

      (0.4522)

      0.0004

      (0.3242)

      0.0001

      (0.1284)

      0.0005

      (0.3599)

      0.0001

      (0.1052)

      0.0000

      (0.0097)

      -0.0003

      (-0.1703)

      -0.0005

      (-0.3025)

      Buy-Sell

      -0.0003

      (-0.1687)

      0.0001

      (0.0425)

      -0.0001

      (-0.0353)

      -0.0001

      (-0.0478)

      0.0001

      (0.0535)

      0.0001

      (0.0498)

      0.0001

      (0.0443)

      -0.0002

      (-0.1026)

      0.0003

      (0.1569)

      0.0002

      (0.1240)

      Trade Rule

      0.7610

      0.3740

      0.4220

      0.2760

      0.1270

      0.3500

      0.0990

      -0.1790

      -0.0930

      -0.2460

      Buy & Hold

      -0.0340

      -0.0340

      -0.0340

      -0.0340

      -0.0340

      -0.0340

      -0.0340

      -0.0340

      -0.0340

      -0.0340

      AMINEX

      Buy Mean

      -0.0015

      (-0.0303)

      -0.0067

      (-0.2053)

      -0.0013

      (-0.0119)

      -0.0039

      (-0.1226)

      -0.0005

      (-0.0262)

      -0.0013

      (-0.0118)

      -0.0032

      (-0.1122)

      -0.0023

      (-0.0619)

      -0.0048

      (-0.1987)

      -0.0072

      (-0.2973)

      Sell Mean

      0.0019

      (0.1631)

      0.0008

      (0.1342)

      0.0017

      (0.2011)

      0.0011

      (0.1491)

      0.002

      (0.2122)

      0.0016

      (0.1829)

      0.0002

      (0.0758)

      0.0008

      (0.1200)

      -0.0009

      (-0.0098)

      -0.0013

      (-0.0195)

      Buy-Sell

      -0.0034

      (-0.1747)

      -0.0075

      (-0.2688)

      -0.0031

      (-0.1220)

      -0.0050

      (-0.2067)

      -0.0025

      (-0.1194)

      -0.0029

      (-0.1348)

      -0.0034

      (-0.1582)

      -0.0031

      (-0.1414)

      -0.0039

      (-0.1857)

      -0.0058

      (-0.2622)

      Trade Rule

      -0.1890

      -0.1350

      0.9190

      0.0660

      0.9740

      0.5950

      -0.6800

      -0.1060

      -1.4900

      -1.9600

      Buy & Hold

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      AMINEX

      Buy Mean

      -0.0015

      (-0.0303)

      -0.0067

      (-0.2053)

      -0.0013

      (-0.0119)

      -0.0039

      (-0.1226)

      -0.0005

      (-0.0262)

      -0.0013

      (-0.0118)

      -0.0032

      (-0.1122)

      -0.0023

      (-0.0619)

      -0.0048

      (-0.1987)

      -0.0072

      (-0.2973)

      Sell Mean

      0.0019

      (0.1631)

      0.0008

      (0.1342)

      0.0017

      (0.2011)

      0.0011

      (0.1491)

      0.002

      (0.2122)

      0.0016

      (0.1829)

      0.0002

      (0.0758)

      0.0008

      (0.1200)

      -0.0009

      (-0.0098)

      -0.0013

      (-0.0195)

      Buy-Sell

      -0.0034

      (-0.1747)

      -0.0075

      (-0.2688)

      -0.0031

      (-0.1220)

      -0.0050

      (-0.2067)

      -0.0025

      (-0.1194)

      -0.0029

      (-0.1348)

      -0.0034

      (-0.1582)

      -0.0031

      (-0.1414)

      -0.0039

      (-0.1857)

      -0.0058

      (-0.2622)

      Trade Rule

      -0.1890

      -0.1350

      0.9190

      0.0660

      0.9740

      0.5950

      -0.6800

      -0.1060

      -1.4900

      -1.9600

      Buy & Hold

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      -0.8100

      JKX OIL AND GAS

      Buy Mean

      0.0006

      (1.2652)

      -0.0012

      (-0.2478)

      -0.0004

      (-0.7126)

      -0.0008

      (-0.5041)

      0.0004

      (-1.1205)

      -0.0004

      (-0.6035)

      -0.0008

      (-0.4156)

      -0.0005

      (-0.5768)

      -0.0009

      (-0.3841)

      -0.0006

      (-0.4853)

      Sell Mean

      0.0031***

      (3.1925)

      0.0019**

      (2.3510)

      0.0024***

      (2.7120)

      0.0023***

      (2.6133)

      0.0029***

      (3.0766)

      0.0023***

      (2.7059)

      0.0022***

      (2.6032)

      0.0023***

      (2.6908)

      0.0025***

      (2.7173)

      0.0026***

      (2.7751)

      Buy-Sell

      -0.0025

      (-1.2946)

      -0.0031

      (-1.5943)

      -0.0028

      (-1.3988)

      -0.0031

      (-1.5691)

      -0.0025

      (-1.2385)

      -0.0027

      (-1.2638)

      -0.0030

      (-1.3764)

      -0.0028

      (-1.2704)

      -0.0033

      (-1.4983)

      -0.0032

      (-1.4385)

      Trade Rule

      1.6700

      0.5300

      1.0400

      0.8300

      1.5200

      1.0900

      0.9360

      1.0700

      0.9600

      1.0400

      Buy & Hold

      -1.2900

      -1.2900

      -1.2900

      -1.2900

      -1.2900

      -1.2900

      -1.2900

      -1.2900

      -1.2900

      -1.2900

      SOCO INTERNATIONAL

      Buy Mean

      0.0003

      (0.1523)

      0.0002

      (0.0807)

      0.0000

      (0.0757)

      0.0001

      (0.0076)

      -0.0005

      (-0.3997)

      -0.0002

      (-0.2122)

      -0.0002

      (-0.2135)

      -0.0005

      (-0.3931)

      -0.0002

      (-0.1920)

      -0.0005

      (-0.4272)

      Sell Mean

      0.0004

      (0.2432)

      0.0002

      (0.1098)

      0.0004

      (0.2250)

      0.0005

      (0.2642)

      -0.0002

      (-0.2022)

      0.0000

      (0.0244)

      0.0001

      (0.0203)

      -0.0002

      (-0.2216)

      0.0001

      (0.0198)

      -0.0004

      (-0.3194)

      Buy-Sell

      -0.0001

      (-0.0886)

      0.0000

      (0.0280)

      -0.0004

      (-0.2568)

      -0.0004

      (-0.2315)

      -0.0003

      (-0.1641)

      -0.0003

      (-0.1565)

      -0.0003

      (-0.1610)

      -0.0002

      (-0.1441)

      -0.0003

      (-0.1459)

      -0.0002

      (-0.0948)

      Trade Rule

      0.2740

      0.1650

      0.1350

      0.1910

      -0.2500

      -0.0600

      -0.0610

      -0.2400

      -0.0470

      -0.3100

      Buy & Hold

      0.0660

      0.0660

      0.0660

      0.0660

      0.0660

      0.0660

      0.0660

      0.0660

      0.0660

      0.0660

      WOOD GROUP

      Buy Mean

      0.0017

      (0.4261)

      0.0018

      (0.5160)

      0.0021

      (0.7840)

      0.0019

      (0.6526)

      0.0019

      (0.6242)

      0.0018

      (0.5474)

      0.0015

      (0.3102)

      0.0015

      (0.3358)

      0.0013

      (0.1862)

      0.0013

      (0.1937)

      Sell Mean

      -0.0001

      (-0.8259)

      0.0003

      (0.4998)

      0.0009

      (0.0878)

      0.0010

      (0.0500)

      0.0011

      (0.0344)

      0.0010

      (0.0589)

      0.0000

      (0.6059)

      0.0001

      (0.5874)

      0.0000

      (0.5948)

      -0.0001

      (-0.6160)

      Buy-Sell

      0.0018

      (1.0897)

      0.0014

      (0.8670)

      0.0012

      (0.6855)

      0.0009

      (0.5254)

      0.0008

      (0.4106)

      0.0008

      (0.4400)

      0.0014

      (0.7881)

      0.0014

      (0.7886)

      0.0013

      (0.6892)

      0.0015

      (0.7080)

      Trade Rule

      0.6500

      0.8900

      1.2500

      1.1200

      1.1400

      1.0600

      0.7130

      0.7360

      0.6270

      0.6170

      Buy & Hold

      0.8400

      0.8400

      0.8400

      0.8400

      0.8400

      0.8400

      0.8400

      0.8400

      0.8400

      0.8400

      AFREN

      Buy Mean

      0.0014

      (0.4160)

      0.0022

      (0.8581)

      0.0012

      (0.3219)

      0.0010

      (0.2154)

      0.0016

      (0.5555)

      0.0021

      (0.7845)

      0.0022

      (0.8407)

      0.0017

      (0.5938)

      0.0019

      (0.6870)

      0.0016

      (0.5452)

      Sell Mean

      0.0010

      (0.1960)

      0.0018

      (0.6210)

      0.0005

      (0.0482)

      0.0001

      (0.2242)

      0.0013

      (0.3172)

      0.0017

      (0.5141)

      0.0018

      (0.5835)

      0.0012

      (0.2732)

      0.0017

      (0.5280)

      0.0013

      (0.3320)

      Buy-Sell

      0.0004

      (0.1742)

      0.0004

      (0.1519)

      0.0007

      (0.3064)

      0.0009

      (0.3769)

      0.0004

      (0.1409)

      0.0004

      (0.1667)

      0.0004

      (0.1496)

      0.0006

      (0.2311)

      0.0002

      (0.0661)

      0.0003

      (0.1200)

      Trade Rule

      0.8900

      1.5600

      0.6300

      0.3970

      1.0300

      1.3300

      1.4200

      1.0300

      1.2500

      1.0000

      Buy & Hold

      0.4320

      0.4320

      0.4320

      0.4320

      0.4320

      0.4320

      0.4320

      0.4320

      0.4320

      0.4320

      HARDY OIL AND GAS

      Buy Mean

      0.0021*

      (1.7412)

      0.0008

      (1.0412)

      0.0006

      (0.9478)

      -0.0001

      (-0.5655)

      -0.0002

      (-0.4975)

      0.0000

      (0.5922)

      -0.0015

      (-0.0948)

      -0.0006

      (-0.3334)

      -0.0011

      (-0.1029)

      -0.0023

      (-0.4259)

      Sell Mean

      0.0044***

      (3.0280)

      0.0029**

      (2.2463)

      0.0028**

      (2.2036)

      0.0020*

      (1.8725)

      0.0014

      (1.4264)

      0.0016

      (1.5307)

      0.0014

      (1.3352)

      0.0016

      (1.3916)

      0.0011

      (1.2439)

      0.0006

      (0.9727)

      Buy-Sell

      -0.0022

      (-1.0062)

      -0.0021

      (-0.9370)

      -0.0022

      (-0.9589)

      -0.0021

      (-0.8967)

      -0.0016

      (-0.6393)

      -0.0016

      (-0.6322)

      -0.0029

      (-1.1613)

      -0.0022

      (-0.8864)

      -0.0022

      (-0.8668)

      -0.0029

      (-1.1345)

      Trade Rule

      0.0250

      1.4500

      1.3700

      0.9500

      0.5000

      0.6300

      0.0300

      0.2900

      0.1300

      -0.3600

      Buy & Hold

      -1.0200

      -1.020

      -1.0200

      -1.0200

      -1.0200

      -1.0200

      -1.0200

      -1.0200

      -1.0200

      -1.0200

      ROYAL DUTCH SHELL-A

      Buy Mean

      0.0010

      (1.1064)

      0.0008

      (0.8381)

      0.0006

      (0.5924)

      0.0002

      (0.0712)

      0.0003

      (0.2122)

      0.0004

      (0.3220)

      0.0004

      (0.3506)

      0.0004

      (0.3229)

      0.0004

      (0.3269)

      0.0005

      (0.4258)

      Sell Mean

      0.0007

      (0.6996)

      0.0004

      (0.3726)

      0.0003

      (0.1298)

      -0.0002

      (-0.3704)

      0.0000

      (0.1794)

      0.0000

      (0.1344)

      0.0001

      (0.1084)

      0.0001

      (0.0393)

      0.0001

      (0.0269)

      0.0001

      (0.0010)

      Buy-Sell

      0.0003

      (0.2788)

      0.0003

      (0.3638)

      0.0003

      (0.3642)

      0.0004

      (0.3887)

      0.0003

      (0.3312)

      0.0004

      (0.3804)

      0.0004

      (0.3821)

      0.0003

      (0.3014)

      0.0003

      (0.2925)

      0.0003

      (0.3178)

      Trade Rule

      0.6420

      0.4690

      0.3310

      0.0350

      0.1170

      0.1640

      0.1770

      0.1850

      0.1900

      0.2130

      Buy & Hold

      0.1160

      0.1160

      0.1160

      0.1160

      0.1160

      0.1160

      0.1160

      0.1160

      0.1160

      0.1160

      PETROFAC

      Buy Mean

      0.0018

      (0.8597)

      0.0017

      (0.7823)

      0.0013

      (0.5265)

      0.0007

      (0.0542)

      0.0008

      (0.0980)

      0.0006

      (0.0352)

      0.0004

      (0.2162)

      0.0008

      (0.1374)

      0.0008

      (0.0843)

      0.0008

      (0.1024)

      Sell Mean

      0.0007

      (0.0056)

      0.0005

      (0.1301)

      0.0001

      (0.3563)

      0.0000

      (0.4014)

      0.0001

      (0.3546)

      -0.0005

      (-0.7333)

      -0.0013

      (-1.1712)

      -0.0003

      (-0.5942)

      -0.0004

      (-0.6475)

      -0.0004

      (-0.6386)

      Buy-Sell

      0.0011

      (0.7089)

      0.0012

      (0.7519)

      0.0012

      (0.7385)

      0.0007

      (0.4096)

      0.0007

      (0.4011)

      0.0012

      (0.6604)

      0.0017

      (0.9492)

      0.0011

      (0.6527)

      0.0012

      (0.6636)

      0.0012

      (0.6674)

      Trade Rule

      0.9900

      0.8840

      0.6560

      0.3150

      0.3430

      0.1760

      -0.0770

      0.3230

      0.2700

      0.2790

      Buy & Hold

      0.5200

      0.5200

      0.5200

      0.5200

      0.5200

      0.5200

      0.5200

      0.5200

      0.5200

      0.5200

      SALAMANDER ENERGY

      Buy Mean

      0.0028**

      (2.2179)

      0.0006

      (0.6306)

      0.0004

      (0.4822)

      -0.0015

      (-0.7665)

      -0.0012

      (-0.5578)

      -0.0005

      (-0.1222)

      -0.0004

      (-0.0412)

      -0.0002

      (-0.0791)

      0.0004

      (0.4487)

      0.0002

      (0.3326)

      Sell Mean

      0.0035***

      (2.5590)

      0.0009

      (0.8582)

      0.0008

      (0.7282)

      -0.0007

      (-0.3076)

      -0.0005

      (-0.1507)

      -0.0001

      (-0.1616)

      0.0001

      (0.2527)

      0.0001

      (0.2485)

      0.0005

      (0.5008)

      0.0003

      (0.3866)

      Buy-Sell

      -0.0007

      (-0.3950)

      -0.0003

      (-0.1828)

      -0.0003

      (-0.2028)

      -0.0008

      (-0.4484)

      -0.0007

      (-0.3959)

      -0.0004

      (-0.2413)

      -0.0004

      (-0.2424)

      -0.0003

      (-0.1400)

      -0.0001

      (-0.0423)

      -0.0001

      (-0.0482)

      Trade Rule

      2.3600

      0.5800

      0.4300

      -0.7700

      -0.5600

      -0.1800

      -0.0900

      -0.0300

      0.2700

      0.1580

      Buy & Hold

      -0.2370

      -0.2370

      -0.2370

      -0.2370

      -0.2370

      -0.2370

      -0.2370

      -0.2370

      -0.2370

      -0.2370

      LAMPRELL

      Buy Mean

      0.0017

      (0.7864)

      0.0021

      (0.9256)

      0.0019

      (0.8440)

      0.0006

      (0.4252)

      -0.0001

      (-0.2032)

      0.0006

      (0.3988)

      0.0004

      (0.3444)

      0.0002

      (0.2830)

      -0.0004

      (-0.1009)

      -0.0003

      (-0.1229)

      Sell Mean

      0.0037

      (1.3877)

      0.0047

      (1.6096)

      0.0051*

      (1.7361)

      0.0035

      (1.2534)

      0.0025

      (0.9710)

      0.0028

      (1.1115)

      0.0027

      (1.0564)

      0.0023

      (0.9558)

      0.0020

      (0.8414)

      0.0023

      (0.8942)

      Buy-Sell

      -0.0020

      (-0.5559)

      -0.0026

      (-0.7006)

      -0.0032

      (-0.8333)

      -0.0029

      (-0.7597)

      -0.0026

      (-0.6688)

      -0.0023

      (-0.5916)

      -0.0023

      (-0.5890)

      -0.0022

      (-0.5601)

      -0.0024

      (-0.6154)

      -0.0026

      (-0.6497)

      Trade Rule

      2.0370

      2.3850

      2.3450

      1.3150

      0.7880

      1.2130

      1.0910

      0.9030

      0.5740

      0.6160

      Buy & Hold

      -0.5800

      -0.5800

      -0.5800

      -0.5800

      -0.5800

      -0.5800

      -0.5800

      -0.5800

      -0.5800

      -0.5800

      ENDEAVOR INT. CORP.

      Buy Mean

      0.0037

      (1.5906)

      0.0038

      (1.5297)

      0.0034

      (1.3778)

      0.0039

      (1.475)

      0.0028

      (1.1576)

      0.0027

      (1.1439)

      0.0030

      (1.1152)

      0.0027

      (-1.0506)

      0.0014

      (-0.6997)

      -0.0011

      (-0.0639)

      Sell Mean

      0.0083***

      (2.7343)

      0.0065**

      (2.3432)

      0.0040

      (1.5998)

      0.0039

      (1.5989)

      0.0038

      (1.5757)

      0.0039

      (1.5932)

      0.0040

      (1.6183)

      0.0039

      (1.5974)

      0.0019

      (0.9874)

      0.0004

      (0.5097)

      Buy-Sell

      -0.0046

      (-1.1791)

      -0.0027

      (-0.6909)

      -0.0006

      (-0.1591)

      0.0000

      (0.0032)

      -0.0009

      (-0.2312)

      -0.0011

      (-0.2863)

      -0.0009

      (-0.2097)

      -0.0012

      (-0.2791)

      -0.0005

      (-0.1196)

      -0.0014

      (-0.3362)

      Trade Rule

      4.3270

      3.8960

      2.7070

      2.8090

      2.4280

      2.4240

      2.3350

      2.2370

      1.1050

      -0.1390

      Buy & Hold

      -1.0380

      -1.0380

      -1.0380

      -1.0380

      -1.0380

      -1.0380

      -1.0380

      -1.0380

      -1.0380

      -1.0380

      CADOGAN PETROLEUM

      Buy Mean

      0.0048

      (1.5215)

      0.0008

      (0.4055)

      0.0016

      (0.5856)

      0.0009

      (0.4019)

      0.0020

      (0.7946)

      0.0021

      (0.8345)

      0.0015

      (0.6244)

      0.0010

      (0.4163)

      0.0021

      (0.8380)

      0.0019

      (0.7596)

      Sell Mean

      0.0022

      (1.0229)

      0.0017

      (0.6919)

      0.0009

      (0.4829)

      0.0009

      (0.4408)

      0.0017

      (0.7490)

      0.0019

      (0.8008)

      0.0015

      (0.6601)

      0.0012

      (0.5177)

      0.0023

      (0.9094)

      0.0021

      (0.8534)

      Buy-Sell

      0.0026

      (0.7562)

      -0.0009

      (-0.2991)

      0.0006

      (0.1900)

      0.0000

      (0.0126)

      0.0003

      (0.1016)

      0.0003

      (0.0865)

      0.0000

      (0.0089)

      -0.0002

      (-0.0552)

      -0.0002

      (-0.0599)

      -0.0002

      (-0.0488)

      Trade Rule

      2.2170

      0.8770

      0.8500

      0.6480

      1.3290

      1.3750

      1.0470

      0.6920

      1.4820

      1.3040

      Buy & Hold

      -0.1940

      -0.1940

      -0.1940

      -0.1940

      -0.1940

      -0.1940

      -0.1940

      -0.1940

      -0.1940

      -0.1940

      HERITAGE OIL

      Buy Mean

      0.0030*

      (1.7854)

      0.0002

      (0.4692)

      0.0011

      (0.8813)

      0.0012

      (0.8656)

      0.0014

      (0.8925)

      0.0016

      (0.9957)

      -0.0003

      (-0.1908)

      -0.0004

      (-0.1583)

      -0.0001

      (-0.2593)

      -0.0004

      (-0.1164)

      Sell Mean

      0.0040**

      (2.4701)

      0.0022

      (1.4286)

      0.0025*

      (1.6870)

      0.0024*

      (1.6411)

      0.0024*

      (1.6480)

      0.0024*

      (1.6968)

      0.0014

      (1.1569)

      0.0014

      (1.1358)

      0.0014

      (1.0940)

      0.0013

      (1.0373)

      Buy-Sell

      -0.0010

      (-0.4386)

      -0.0020

      (-0.8642)

      -0.0014

      (-0.5921)

      -0.0012

      (-0.5087)

      -0.0010

      (-0.4025)

      -0.0008

      (-0.3193)

      -0.0017

      (-0.6622)

      -0.0017

      (-0.6698)

      -0.0015

      (-0.5411)

      -0.0018

      (-0.6399)

      Trade Rule

      2.7340

      0.8520

      1.4320

      1.4000

      1.4210

      1.5270

      0.6060

      0.5750

      0.5610

      0.4190

      Buy & Hold

      -0.5780

      -0.5780

      -0.5780

      -0.5780

      -0.5780

      -0.5780

      -0.5780

      -0.5780

      -0.5780

      -0.5780

      KENTZ

      Buy Mean

      0.0028

      (1.5756)

      0.0020

      (0.8838)

      0.0016

      (0.5683)

      0.0009

      (0.0743)

      0.0005

      (0.3018)

      0.0004

      (0.3440)

      0.0006

      (0.1845)

      0.0007

      (0.1060)

      0.0010

      (0.0929)

      0.0007

      (0.1449)

      Sell Mean

      0.0013

      (0.3273)

      0.0003

      (0.4628)

      0.0006

      (0.1887)

      -0.0004

      (-0.9361)

      -0.0010

      (-1.3778)

      -0.0012

      (-1.4586)

      -0.0009

      (-1.2344)

      -0.0007

      (-1.0502)

      -0.0004

      (-0.8372)

      -0.001

      (-1.1978)

      Buy-Sell

      0.0015

      (1.0693)

      0.0017

      (1.1639)

      0.0010

      (0.6228)

      0.0014

      (0.8791)

      0.0015

      (0.9648)

      0.0016

      (1.0291)

      0.0016

      (0.9816)

      0.0015

      (0.8967)

      0.0014

      (0.8391)

      0.0017

      (1.0039)

      Trade Rule

      1.5840

      0.8270

      0.7920

      0.2290

      -0.1280

      -0.1640

      0.0279

      0.1610

      0.3230

      0.0820

      Buy & Hold

      0.6670

      0.6670

      0.6670

      0.6670

      0.6670

      0.6670

      0.6670

      0.6670

      0.6670

      0.6670

      EXILLON ENERGY

      Buy Mean

      0.0035*

      (1.7271)

      0.0014

      (0.7145)

      0.0023

      (1.1654)

      0.0025

      (1.2916)

      0.0032

      (1.5953)

      0.0026

      (1.2469)

      0.0024

      (1.1745)

      0.0023

      (1.1351)

      0.0030

      (1.4378)

      0.0034

      (1.6086)

      Sell Mean

      0.0041**

      (1.9846)

      0.0018

      (0.8463)

      0.0032

      (1.4663)

      0.0036*

      (1.6514)

      0.0043*

      (1.9806)

      0.0028

      (1.3446)

      0.0027

      (1.2774)

      0.0025

      (1.1932)

      0.0035

      (1.6282)

      0.0036*

      (1.7111)

      Buy-Sell

      -0.0007

      (-0.2800)

      -0.0004

      (-0.1575)

      -0.0009

      (-0.3779)

      -0.0011

      (-0.4477)

      -0.0011

      (-0.4544)

      -0.0003

      (-0.1105)

      -0.0003

      (-0.1176)

      -0.0001

      (-0.0582)

      -0.0005

      (-0.1799)

      -0.0003

      (-0.0983)

      Trade Rule

      2.8580

      1.1420

      1.9430

      2.1690

      2.6560

      1.8720

      1.7680

      1.6780

      2.2050

      2.3890

      Buy & Hold

      -0.0571

      -0.0571

      -0.0571

      -0.0571

      -0.0571

      -0.0571

      -0.0571

      -0.0571

      -0.0571

      -0.0571

      Notes: The table show returns of combinations of short- and long-moving averages and zero bandwith (5,10,0 ... 5,100,0). The Buy and Sell Mean returns are daily averages of the total return generated from the buy and sell transactions, while the values in parenthesis under them are t-statistics to be used in rejecting or accepting the null hypothesis of equality at *: 10%, **: 5%, and ***: 1% significance levels. The Buy-Sell represents difference between Buy and Sell mean returns. The “Trading Rule” and “Buy and Hold” are total trading returns from each rule (moving average) and corresponding buy and hold investment strategy returns over the same period. Number of days in a buy decision ranges between 98 and 521 with average of 362 days. Likewise, number of days in a sell decision ranges between 156 and 664 with average of 342 days.


      The results in Table 2 show that the indices except the FTSE UK AIM SS Oil and Gas index have more buy decisions (signals) than sell decisions (signals) which is a sign of the bullish condition. The FTSE UK AIM SS Oil and Gas index shows a sign of bearish condition due to higher sell-days than buy-days. The t-statistics generated in relation to the buy and sell mean returns of the indices are not more than their critical values to reject the null hypothesis. Based on these results, the moving average trading rule cannot provide returns that are significantly different from the simple buy and hold strategy even without considering the transaction costs.

      In the case of BP, JKX Oil and Gas, Hardy Oil and Gas, Heritage Oil and Exillon Energy, the null hypothesis is rejected. However, it cannot be concluded that the trading rules are influential since the buy mean returns are not significantly different from the buy and hold returns.

      The reliability of the trading rule results presented in Table 2 has been tested by a stationarity test conducted on the moving average (10) trading rule return series (as a sample) to assess whether the series is stationary. If the series is non- stationary, then the ‘buy’ and ‘sell’ mean returns used as a yardstick for assessing the performance of a trading rule strategy would not be realistic since the series is generated from a stochastic process. On the contrary, if the series is found to be stationary by rejecting the null hypothesis of a unit root, then the trading rule buy or sell mean returns can be assumed to be constant over which it can be compared with the unconditional mean return of the buy and hold investment strategy. Results of the stationarity test are presented in Table 3.

      Table 3 shows the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests results on the return series generated from the moving average (10) trading rule. As mentioned earlier, the test was meant to assess whether the statistical properties used to measure the performance of a trading rule are generated from a stationary process or not. The null hypothesis that the ‘series has a unit root’ is rejected or accepted by the t-statistics and p-values of the ADF and PP tests generated. Based on the results presented in Table 3, both the t- statistics and p-values are highly significant even at 1% significance level, in which the null hypothesis of unit root is strongly rejected. It is therefore concluded that the moving average trading rule return series is stationary and its constant mean can be compared with the unconditional mean return of the buy and hold investment strategy.


      Table 3. Stationarity Test for Moving Average (10) Trading Rule Return Series

      Augmented Dickey

      Fuller (ADF) Test

      Phillips-Perron (PP)

      Test


      T-Stat

      P-Value

      T-Stat

      P-Value

      1

      FTSE All Share

      -26.9298

      0.0000

      -27.8016

      0.0000

      2

      FTSE 100

      -27.0434

      0.0000

      -27.6492

      0.0000

      3

      FTSE UK Oil & Gas

      -27.5932

      0.0000

      -27.7400

      0.0000

      4

      FTSE UK O&G Prod.

      -27.6836

      0.0000

      -27.7423

      0.0000

      5

      FTSE AIM SS O&G

      -25.5402

      0.0000

      -25.5194

      0.0000

      6

      Amec Plc

      -27.8926

      0.0000

      -28.7138

      0.0000

      7

      BG Group

      -22.0363

      0.0000

      -21.4690

      0.0000

      8

      BP

      -14.0095

      0.0000

      -14.0435

      0.0000

      9

      Cairn Energy

      -25.0875

      0.0000

      -24.5480

      0.0000

      10

      Dragon Oil

      -13.4671

      0.0000

      -12.2605

      0.0000

      11

      Fortune Oil

      -35.6595

      0.0000

      -37.9720

      0.0000

      12

      Hunting

      -20.2925

      0.0000

      -18.7155

      0.0000

      13

      Premier Oil

      -9.3436

      0.0000

      -9.3484

      0.0000

      14

      Royal Dutch Shell-B

      -13.6467

      0.0000

      -13.2590

      0.0000

      15

      Tullow Oil

      -17.0608

      0.0000

      -17.0695

      0.0000

      16

      Aminex

      -34.3535

      0.0000

      -35.6511

      0.0000

      17

      JKX Oil and Gas

      -11.7874

      0.0000

      -12.0803

      0.0000

      18

      Soco International

      -25.9464

      0.0000

      -25.8425

      0.0000

      19

      Wood Group (John)

      -19.7088

      0.0000

      -18.4200

      0.0000

      20

      Afren

      -18.8397

      0.0000

      -18.0106

      0.0000

      21

      Hardy Oil and Gas

      -8.8730

      0.0000

      -8.8302

      0.0000

      22

      Royal Dutch Shell-A

      -11.6946

      0.0000

      -11.5412

      0.0000

      23

      Petrofac

      -15.3649

      0.0000

      -15.2286

      0.0000

      24

      Salamander Energy

      -7.7000

      0.0000

      -7.0001

      0.0000

      25

      Lamprell

      -16.1638

      0.0000

      -16.1279

      0.0000

      26

      Endeavor International Corp.

      -8.9413

      0.0000

      -8.8794

      0.0000

      27

      Cadogan Petroleum

      -14.6592

      0.0000

      -14.2911

      0.0000

      28

      Heritage Oil

      -8.2063

      0.0000

      -8.1915

      0.0000

      29

      Kentz

      -8.7057

      0.0000

      -7.9914

      0.0000

      30

      Exillon Energy

      -8.4078

      0.0000

      -7.4121

      0.0000


      We also employed the methodology of Milionis and Papanagiotou (2008) to assess the performance of the various combinations of the moving averages used as a trading rule. The graphical presentation of the returns generated by various moving average trading rules and a simple buy and hold investment strategy is made in figure 1 for qualitative observations.

      Figure 1. Performances of Moving Averages Trading Rules Returns against the Return from Simple Buy and Hold Investment Strategy

      moving-average-trading-rule-return

      moving-average-trading-rule-return

      moving-average-trading-rule-return

      moving-average-trading-rule-return

      moving-average-trading-rule-return

      moving-average-trading-rule-return

      moving-average-trading-rule-return

      moving-average-trading-rule-return

      Figure 1 showed the total returns generated by every moving average trading rule (ranging from ‘5,10,0’ to ‘5,100,0’) against the total return from the buy and hold strategy. It is obvious from the graphs that the shorter moving average trading rule of ‘5,10,0’ produced higher returns compared to the other longer moving average trading rules on the charts in all the FTSE share indices and the stocks of BP, Dragon oil, Premier Oil, Royal Dutch Shell ‘B’, Tullow Oil, JKX Oil and Gas, Soco International, Royal Dutch Shell ‘A’, Petrofac, Salamander Energy, Endeavor International, Cadogan Petroleum, Heritage Oil, Kentz and Exillon Energy. Other stocks such as Amec, BG Group, Cairn Energy and Wood Group that have not been mentioned above do not show superior performance of the shorter moving average trading rule. The moving average trading rules seem to outperform a simple buy and hold investment strategy in the FTSE UK Oil and Gas index, the FTSE UK Oil and Gas Producers index, the FTSE AIM SS Oil and Gas index and in the stocks of Amec, BG Group, BP, Cairn Energy, Premier Oil, JKX Oil and Gas, Hardy Oil and Gas, Lamprell Plc, Endeavor International Corporation, Cadogan Petroleum, Heritage Oil and Exillon Energy.

  4. Findings

    Technical trading rules were employed on the UK oil and gas stocks to see the possibility of making returns higher than that from buy and hold strategy. Our findings in all the series suggested that the trading rule cannot provide sufficient profit to cover the brokerage cost associated with every transaction. We also employed moving average trading rules in a similar way as used by Brock et al (1992) to assess whether our findings are going to be different. However, despite the application of the ten different combinations of the moving average trading rule, it was not possible to reject the null hypothesis that the returns generated from the moving average trading rule are not different from the returns of the buy and hold investment strategy. To confirm the authenticity of our results, we tested whether the return series generated from the moving average trading rule is stationary. The results from the unit root tests conducted on the moving average (10) trading rule return series confirmed that the series are stationary and therefore authenticate the use of constant statistical properties such as the mean to assess the power of the trading rule. We also tested the assertion of Milionis and Papanagiotou (2008) that shorter moving average trading rules perform better than longer moving average trading rules. We found this trend in some of the series, but it could not be generalised to all the oil and gas stocks.

  5. Conclusion

The performance of technical trading rules relative to buy and hold strategy has been an active area of research in the field of finance. The application of trading and filter rules developed to exploit the persistence in oil and gas stock returns does not provide returns which are significantly different from buy and hold strategy. Moving averages-based rules were also tested and again the application of these strategies did not provide returns which are significantly different from the buy and hold strategy. The performance of the short and long moving averages-based strategies was also measured and there was not any significant evidence to conclude on whether short moving averages perform better than the long moving averages or vice versa.


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