A Comparative study between returns on RSI and Stochastic RSI using the Buy and Hold Strategy on Indian Equities
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Abstract
The research will focus on trying to establish the better returns on Stochastic RSI in comparison to Relative Strength Index. The study puts technical trading indicators in context of financial econometrics, performance analysis via accounting, to fill the gap between market-based indicators, on the one hand, and theoretical models of predictability of returns in finance, on the other. The hindrance on the way is the absence of evident research on what indicator gathers more effectively.
Design, Methodology and Approach:
With the help of hypothesis testing supported by python we test the performance of 23 equities of various sectors to determine whether the returns on the 23 equities combined outperform the lagging Relative Strength Index with the help of the StochasticRSI. At the same time we also can test the performance of the two indicators on the said equities in order to know whether a selectively pointed approach gives us an outcome in which we can know what indicator to use on what equity.
Findings:
The study gives tangible understanding of the performance of the indicators and assists in advising which indicator to trade which equity in order to get better returns. We are able to determine the equities that StochasticRSI is performing better than RSI. We also determine performance of StochasticRSI v/s RSI performance on sample we are testing.
Research Limitations:
Trading costs have not been included. With these costs in mind, we will have a better picture. The sample is small and does not work on the whole universe of equities in Indian Equity Market.
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References
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