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Size, trading volume, and the profitability of technical trading

Yung-Ho Chang (Tunghai University College of Management, Taichung, Taiwan)
Chia-Ching Jong (Tunghai University College of Management, Taichung, Taiwan)
Sin-Chong Wang (College of Management, Tunghai University, Taichung, Taiwan)

International Journal of Managerial Finance

ISSN: 1743-9132

Article publication date: 7 August 2017



The purpose of this paper is to evaluate the profitability of technical trading relative to buy-and-hold (BH) strategy at firm level, controlling for firm size and trading volume.


This paper applies variable-length moving averages (VMAs) thoroughly to each and every stock listed on Taiwan Stock Exchange (TWSE) and computes the excess returns of technical trading relative to BH strategy. The samples are further grouped by firm size and trading volume. Furthermore, possible data snooping bias is investigated by employing Hansen’s (2005) Superior Predictive Ability tests.


The result shows that VMAs outperform the BH strategy. The profitability of VMAs, remarkably, is positively associated with size and trading volume. After correcting for data snooping bias, VMAs with longer moving averages outperform VMAs with shorter moving averages. The evidence suggests that size and volume information is accountable for trend projection.


Unlike past studies simply applying technical trading rules to market indices, portfolios, or selected stocks, this paper evaluates the profitability of technical trading by applying VMAs comprehensively to each and every individual stock listed on TWSE controlling for the effect of firm size and trading volume, providing more practical insights for trading individual stocks.



The authors thank the Editor and the anonymous referee for the valuable comments helping advance the research. The authors are indebted to Peter Reinhard Hansen for his guidance in using the Ox programming codes that he created to execute Superior Predictive Ability tests. The authors are also thankful to Jurgen Doornik and Marius Ooms for providing the authors the permission to use Ox program and its instructional manuals for Superior Predictive Ability tests. Moreover, the paper at its early stage was much improved by the useful comments of Bong-Soo Lee who was with Florida State University, Florida, USA, and passed away in March, 2015. The authors are grateful to the participants providing constructive comments in the thesis seminar held at Tunghai University in 2012. This research has no conflict of interest with any parties or individuals. All errors remain our own.


Chang, Y.-H., Jong, C.-C. and Wang, S.-C. (2017), "Size, trading volume, and the profitability of technical trading", International Journal of Managerial Finance, Vol. 13 No. 4, pp. 475-494.



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