An analysis of trading strategies in eleven European stock markets

Abstract

In recent years, the validity of the weak form efficient market hypothesis (EMH) has been called into question as several studies have uncovered evidence that technical trading rules have predictive ability with respect to both developed and emerging stock market indices. This study analyses the forecasting power of 2 of the most popular trading rules using index data for a selection of 11 European stock markets over the January 1991 to December 2000 period. The findings indicate that the emerging markets included in this paper are informationally inefficient; these markets displayed some degree of predictability in their share returns, although the developed markets did not. Furthermore, the results point to large differences in the performance of the rules examined; while small size filters consistently outperformed the buy-and-hold strategy in the emerging markets examined even after the consideration of transaction costs, the performance of the moving average rules was erratic and varied dramatically from market to market.Trading rules, emerging markets, market efficiency,

The Market Quality to Technical Analysis Performance: Intercountry Analysis

“…This was shown by La Porta et al (2002). Previous studies also indicate that the technical analysis signal is reliable in developing markets, but not in developed markets (Fifield et al 2005 andMcKenzie 2007). Bessembinder and Chan (1995) In Indonesia, Sulistiawan and Hartono (2014) give evidence that technical analysis signals before earnings announcements produce profit.…”

“…This issue is very important to bridge technical analysis studies, because previous studies have produced different results between developing countries and developed countries. Technical analysis signals in developed markets, such as in the United States (U.S.) and the United Kingdom (UK), produce lower performances than those in developing markets such as countries in South America (McKenzie 2007), Eastern Europe (Fifield et al 2005), and Asia (Ahmed et al 2000). Those results suggest that market quality of a country affects its technical analysis performance, but none of the studies directly examines this idea.…”

“…In many references of technical analysis, for example, Luca (2000) and technical analysis software such as Meta Stock or Chart Nexus, provide many technical analysis indicators that can be used to generate a buy or sell signal. This study uses the Moving Average (MA) that produced good performance in previous researches [Milionis and Papanagiotou 2008;McKenzie 2007;Fifield Fifield et al 2005;Wonget al 2003;Ahmed et al 2000;Bessembinder and Chan 1995;and Brock et al 1992). …”

“…Technical analysis returns in the Greece market are more dominant than those in the US market (Milionis and Papanagiotou 2008). Another study divides stock market quality based on large and small categories with a nominal scale and only uses European stock markets (Fifield et al 2005). …”

Testing the weak‐form efficiency in African stock markets

“…While the weak-form market efficiency of the major developed and emerging stock markets of Latin America, Eastern Europe, and Asia have been the major focus of researchers in the past (Ayadi and Pyun, 1994;Claessens et al, 1995;Urrutia, 1995;Fifield et al, 2002Fifield et al, , 2005, the weak-form hypothesis has received little attention from researchers in Africa. None of the few existing studies provides a continent-wide analysis.…”