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An investigation of the role of technical analysis in Kuwait

Hesham I. Almujamed (School of Accounting & Finance, University of Dundee, Dundee, UK)
Suzanne Fifield (School of Accounting & Finance, University of Dundee, Dundee, UK)
David Power (School of Accounting & Finance, University of Dundee, Dundee, UK)

Qualitative Research in Financial Markets

ISSN: 1755-4179

Article publication date: 5 April 2013

Abstract

Purpose

The purpose of this paper is to investigate the technical methods that investors in the Kuwait Stock Exchange use to evaluate ordinary shares. The research examines the extent of investors' use of technical analysis, and the technical indicators and the sources of technical information employed by investors. Further, it compares the valuation methods and the sources of information employed by Kuwaiti investors with those used by investors in other developed and emerging stock markets.

Design/methodology/approach

A semi‐structured questionnaire guided the interviews with institutional investors, technical analysts and investment analysts in Kuwait.

Findings

Technical analysis is commonly used among research participants, particularly when timing their entry and exit points. The participants use a mixture of trend and pattern seeking; the Moving Average Rule was heavily used in the market but the Filter Rule Approach was not. Interviewees believed that investors did not have complete information about Kuwaiti quoted companies. Investors in Kuwait behave like their counterparts in other developed and emerging stock markets; fundamental analysis is considered the main valuation method among research participants, while technical and risk analyses were ranked second and third, respectively.

Practical implications

Interviewees in Kuwait paid more attention to technical analysis than did investors in developed countries; technical analysts looked at a company's fundamentals before they consulted graphs when deciding to purchase ordinary shares. Further, chartists followed trades of large investors to make profits. This topic needs to be investigated in emerging markets because these markets may be inefficient; trends and patterns may characterise the data from these markets and practitioners may use these techniques to exploit such patterns in returns. Further, the findings in this study may aid the regulators of these markets in their development of a framework that could improve efficiency by increasing the level of disclosure and transparency among listed firms.

Originality/value

This is one of the first studies in Kuwait to report the views of technical analysts and institutional investors about technical approaches to equity investment that are used in the market. Most studies on this topic have been conducted in developed stock markets. The current study considers the case for an emerging stock market, which is important in the Gulf and Middle East region. Further, access to technical analysts has been limited in prior research but this was not an issue in the current investigation.

Keywords

Citation

Almujamed, H.I., Fifield, S. and Power, D. (2013), "An investigation of the role of technical analysis in Kuwait", Qualitative Research in Financial Markets, Vol. 5 No. 1, pp. 43-64. https://doi.org/10.1108/17554171311308959

Publisher

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Emerald Group Publishing Limited

Copyright © 2013, Emerald Group Publishing Limited