Abstract:

The paper examines the tertiary trend in the development of share prices. Its aim is to characterize the behaviour of tertiary trend based on volatility of share prices, which can be appropriately used to generate “buy and sell” signals and thus to beat the passive strategy of Buy and Hold. The research has monitored several characteristics of volatility of tertiary trend which characterize the trend and indicate that after several days of growth or decline in share prices the trend will change. The main characteristic is the length of the trend; as another characteristic is used accumulated change, i.e. profit or loss and their adjustment - standardized overall or moving standard deviation. In addition to these characteristics, we also marginally examine the impact of monthly anomalies on the movement of share prices. The results of analysis will be used to make decisions on buy and sell signals. Applicability of these characteristics was verified on the shares of 5 companies traded on the stock exchange, namely CEZ, O2, KB, Pegas, and Philip Morris. Data on their daily closing prices from 2006 (with the exception of Pegas whose trading on the stock exchange began in 2008) to 2015 were used for the analysis.