We apply the approach of [5] by examining whether the portfolios based on the trend-following strategy delivers abnormal returns. Sorted by volatility in previous year, portfolios are traded by following moving average timing strategy to examine their investment performance within the sample period from 1996–2011 for companies listed in the Taiwan stock market. We find that the moving average timing strategy outperforms the buy-and-hold strategy. The CAPM and the Fama-French three-factor models can explain the abnormal returns of the moving average timing strategy. Furthermore, the performance 10-day moving average timing strategy outperforms other timing strategies based on 20-, 50-, 100- and 200-day moving average across volatility quintiles. That means higher volatility quintile portfolios with 10-day moving average timing strategy tend to have better performance than those portfolios with longer days of moving average timing strategy.
