Tests of technical trading strategies in the emerging equity markets of Latin America and Asia

Abstract

This study examines the potential profit of technical trading strategies among 10 emerging equity markets of Latin American and Asia: Argentina, Brazil, Chile, Mexico, India, Korea, Malaysia, Philippines, Taiwan, and Thailand. We use daily inflation adjusted returns for the January 1982 to April 1995 period. Ten different variable moving average trading models are assessed through a bootstrapping simulation. The average buy-sell returns difference after trading costs for each strategy and country are compared to a buy and hold strategy. Taiwan, Mexico and Thailand emerge as markets where technical trading strategies may be profitable. We found no strong evidence of profitability for the other markets.

Technical Trading Rules and Trading Signals in the Black Market for Foreign Exchange in Sudan

“…In a more comprehensive study including Indonesia, Mexico, Taiwan, Canada, and U.S., stock markets, Ito (1999) found trading rules captures quite strongly trading patterns (buy and sell signals) in all these markets with exception of the U.S., stock markets. Similar conclusion supporting relevance of trading rules analysis in Latin America stock markets concluded by Ratner and Leal (1999).…”

“…A number of research studies (Besseminder and Chan, 1995;Ratner and Leal 1999;Ito 1999;Kho 1996;Levich and Thomas,1993), indicated that trading rules showed significant predictive power of profits in a number of Asian markets including Malaysia, Thailand, and Taiwan, but less predictive in more developed markets of Hong Kong and Japan. In a more comprehensive study including Indonesia, Mexico, Taiwan, Canada, and U.S., stock markets, Ito (1999) found trading rules captures quite strongly trading patterns (buy and sell signals) in all these markets with exception of the U.S., stock markets.…”

Stock market trading rule based on pattern recognition and technical analysis: Forecasting the DJIA index with intraday data

“…In line with this, Brock et al (1992) confirm that returns obtained from technical trading rules are not consistent with four common models in finance theory: the random walk, the AR(1), the GARCH-M, and the Exponential GARCH. Ratner and Leal (1999) state that 82 out of the 100 country-trading rule combinations tested in ten emerging markets, disregarding their statistical significance, correctly predict the direction of changes in the return series.…”

The Impact of Technical Analysis on Stock Returns in an Emerging Capital Markets (ECM’s) Country: Theoretical and Empirical Study

“…In conclusion, they stated that the inefficient stock market is considered a high predictive market. Ratner and Leal (1999) examined the possible return of ten -long-term moving average (VMA)‖ trading rules in ten of the emerging markets in Asia and Latin America. The results indicate that Mexico, Thailand and Taiwan are markets where technical trading strategies could be profitable, but they have not found solid evidence of returns in other markets.…”