Predictive ability and profitability of simple technical trading rules: Recent evidence from Southeast Asian stock markets

Yu, Hua‐Gen; Nartea, Gilbert V.; Gan, Christopher; Yao, Lee J.

doi:10.1016/j.iref.2012.07.016

Cited by 88 publications

(48 citation statements)

References 35 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Yu et al argued that the predictive ability of technical trading rules appears only when the market is less efficient [8]. Hudson et al tested the possibility of earning excess returns by using technical analysis in the UK market and found that although the technical trading rules do have predictive ability, it considerably weakens when one takes into account trading costs [9].…”

Section: Introductionmentioning

confidence: 99%

Testing the performance of technical trading rules in the Chinese markets based on superior predictive test

Wang

Jiang

et al. 2015

Physica A: Statistical Mechanics and its Applications

View full text Add to dashboard Cite

Technical trading rules have a long history of being used by practitioners in financial markets. Their profitable ability and efficiency of technical trading rules are yet controversial. In this paper, we test the performance of more than seven thousands traditional technical trading rules on the Shanghai Securities Composite Index (SSCI) from May 21, 1992 through June 30, 2013 and Shanghai Shenzhen 300 Index (SHSZ 300) from April 8, 2005 through June 30, 2013 to check whether an effective trading strategy could be found by using the performance measurements based on the return and Sharpe ratio. To correct for the influence of the data-snooping effect, we adopt the Superior Predictive Ability test to evaluate if there exists a trading rule that can significantly outperform the benchmark. The result shows that for SSCI, technical trading rules offer significant profitability, while for SHSZ 300, this ability is lost. We further partition the SSCI into two sub-series and find that the efficiency of technical trading in sub-series, which have exactly the same spanning period as that of SHSZ 300, is severely weakened. By testing the trading rules on both indexes with a five-year moving window, we find that the financial bubble from 2005 to 2007 greatly improve the effectiveness of technical trading rules. This is consistent with the predictive ability of technical trading rules which appears when the market is less efficient.

show abstract

Section: Introductionmentioning

confidence: 99%

Testing the performance of technical trading rules in the Chinese markets based on superior predictive test

Wang

Jiang

et al. 2015

Physica A: Statistical Mechanics and its Applications

View full text Add to dashboard Cite

show abstract

“…Individual and institutional investors often predict future prices with reference to technical indicators because these indicators are related to contrarian strategies based on the overreaction hypothesis or on the momentum strategy induced by excessive self-confidence. The effectiveness of moving average (MA) and other technical indicators has been confirmed by relevant studies, along with the informational content of trading rules (Bessembinder & Chan, 1995;Brock, Lakonishok, & LeBaron, 1992;Gençay, 1999;Gençay, Ballocchi, Dacorogna, Olsen, & Pictet, 2002;Gençay, Dacorogna, Olsen, & Pictet, 2003;Gençay & Stengos, 1997, 1998Lo, Mamaysky, & Wang, 2000;Metghalchia, Marcucci, & Chang, 2012;Ni, Lee, & Liao, 2013;Yu, Nartea, Gan, & Yao, 2013).…”

Section: Introductionmentioning

confidence: 87%

MA trading rules, herding behaviors, and stock market overreaction

Liao

Huang

2015

International Review of Economics & Finance

View full text Add to dashboard Cite

“…Accordingly, an MACD rule can be described as MACD(s, l, k) where s and l are the lag lengths of short (fast) and long (slow) EMA, respectively, and k is the lag length of the signal line. We use the most popular MACD parameters among practitioners, which is also the default parameter for technical analysis software supplied by most data vendors: MACD (12,26,9).…”

Section: Technical Trading Rulesmentioning

confidence: 99%

Various moving average convergence divergence trading strategies: a comparison

Hung

2016

Investment Management and Financial Innovations

View full text Add to dashboard Cite

Some studies published recently (Dejan Eric, 2009;R. Rosillo, 2013; Terence Tai-Leung Chong, 2008;Ülkü and Prodan, 2013) uncover that moving average convergence divergence (MACD) trading rules have predictive ability in many countries. The MACD trading strategies applied by these papers to execute the trading signals are various. This study analyzes the performance of a MACD trading strategy (MACD-4 in the current study), which is applied popularly by practitioners, but was not tested by prior academicians. Furthermore, the author compares the performance of each of the strategies on a group of markets to identify the best one. Before considering the costs, the author finds that the MACD-4 trading strategy has predictive ability. The best performance is MACD strategy applied by Terence Tai-Leung Chong (2008). This strategy is also the most effective one if it is applied in a high trading cost environmentm because the numbers of trades created are the lowest. Especially, the strategy applied by R. Rosillo (2013) is unpredictable in the selected samples.

show abstract

Predictive ability and profitability of simple technical trading rules: Recent evidence from Southeast Asian stock markets

Cited by 88 publications

References 35 publications

Testing the performance of technical trading rules in the Chinese markets based on superior predictive test

Testing the performance of technical trading rules in the Chinese markets based on superior predictive test

MA trading rules, herding behaviors, and stock market overreaction

Various moving average convergence divergence trading strategies: a comparison

Contact Info

Product

Resources

About