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1 – 10 of over 62000Eddie Hui, Philip Yam, John Wright and Kevin Chan
The purpose of this study is to verify whether the trading strategy can beat the “buy-and-hold” strategy for the securitized real estate indices of six Asian economies: Hong Kong…
Abstract
Purpose
The purpose of this study is to verify whether the trading strategy can beat the “buy-and-hold” strategy for the securitized real estate indices of six Asian economies: Hong Kong, China, Japan, Taiwan, Thailand and Malaysia.
Design/methodology/approach
This paper constructs a trading strategy from the Shiryaev-Zhou index and tests the strategy on the securitized real estate indices of six emerging Asian economies: Hong Kong, China, Japan, Taiwan, Thailand and Malaysia. The authors compare the resulting profits from using the trading strategy with the resulting profits from using the “buy-and-hold” strategy. The authors consider three cases: no transaction costs, 0.1 percent transaction costs, and 0.2 percent transaction costs.
Findings
The results show that the trading strategy the authors constructed generally outperforms the “buy-and-hold” strategy even in the presence of transaction costs. In particular, the authors have a new finding as follows: Thailand and Malaysia's securitized real estate indices fell drastically during the period of observation. However, applying the trading strategy to these two securitized real estate indices can still earn a profit.
Practical implications
The trading strategy is particularly useful in protecting investors from huge loss in adverse market conditions. The results can be applied to the field of finance/investment that investors can construct a trading strategy similar to the authors to earn more profits.
Originality/value
This study will consider cases where both buying and selling costs exist, so the scenario is more like stock transactions in real-life equity markets. Furthermore, in this paper, for each securitized real estate index, the authors plot a graph to show the holding and non-holding periods under the trading strategy. This would help the authors explain the resulting profit under the trading strategy. This kind of graphical analysis was neglected by Hui and Yam.
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Massoud Metghalchi, Jianjun Du and Yixi Ning
This paper tests two moving average technical trading rules for four Asian markets. Our results indicate that moving average rules do indeed have predictive power and can discern…
Abstract
This paper tests two moving average technical trading rules for four Asian markets. Our results indicate that moving average rules do indeed have predictive power and can discern recurring price patterns for profitable trading. Moreover, our results support the hypothesis that technical trading rules can outperform the buy‐and‐hold strategy. Break‐even one‐way trading costs are estimated to be high for all four markets. To confirm the test outcome, robust tests based on bootstrap and the related t‐tests among the markets are also carried out. We conclude from the statistical results that moving average rules are valid and indeed have predictive power. It is implied that the trading rules may be used to design a trading strategy that will beat the buy‐and‐hold strategy in the Hong Kong, Singapore, South Korea, and Taiwan markets. The contribution of the current study is that this is the first validation test of trading rules using four markets at a similar development stage and culture tradition; and in the tests, we use most current and longer periods than the periods used in previous literature. Our robust tests are unique and considered distribution‐free.
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Catherine A. Finger and Wayne R. Landsman
This paper provides evidence that will help stock market participants interpret sell‐side analyst buy/sell recommendations. We examine whether recommendation levels (e.g. buy…
Abstract
This paper provides evidence that will help stock market participants interpret sell‐side analyst buy/sell recommendations. We examine whether recommendation levels (e.g. buy) correspond with traditional predictors of the underlying stock's performance, and whether recommendation revisions (e.g. an upgrade) are consistent with news analysts receive. Consistent with theory, we find that more optimistic recommendations are associated with higher mean forecast errors, forecast revisions, and forecasted earnings‐to‐price ratios. However, contrary to expectations, they also have higher market‐to‐book ratios, higher market values, and lower ratios of value to price (Lee et al. 1999). These results are probably driven by specific differences between buys and the less optimistic recommendations, as holds and sells are rarely distinguishable from each other. Our recommendation revision findings are consistent with our expectations. Upgrades have significantly larger earnings forecast errors, earnings forecast revisions, and unexpected earnings growth than do reiterations or downgrades.
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Khumbulani L. Masuku and Thabo J. Gopane
The study considers time-varying risk premium in investigating the capability of technical analysis (TA) to predict and outperform a buy–hold strategy in Bitcoin exchange rate…
Abstract
Purpose
The study considers time-varying risk premium in investigating the capability of technical analysis (TA) to predict and outperform a buy–hold strategy in Bitcoin exchange rate returns.
Design/methodology/approach
The study tests the technical trading rule of fixed moving average (FMA) on daily actual and equilibrium returns of Bitcoin exchange rates. The equilibrium returns are computed using dynamic CAPM in conjunction with a VAR-MGARCH (1, 1) system. The empirical evaluation of the study uses a case study of four Bitcoin exchange rates (BTC/AUD, BTC/EUR, BTC/JPY and BTC/ZAR) for the period 19 June 2010 to 30 October 2020.
Findings
The findings are consistent with related studies in conventional foreign exchange markets that find TA to be profitable, especially in emerging markets. Nevertheless, the consideration of risk premium has the effect of reducing the abnormal returns. Also, further robust tests reveal that Bitcoin returns possess a momentum effect which prompts further study in efficient market hypothesis research.
Practical implications
The empirical findings of this study should benefit portfolio managers and active investors on the strength of TA to predict returns in a speculative market like the Bitcoin exchange rate market.
Originality/value
The study takes cognisance that cryptocurrency trading is speculative in nature which renders it a good candidate for TA methods. While there are studies that have explored the value of TA in Bitcoin exchange rates, these studies fail to incorporate the effects of time-varying risk premiums, the strength and focus of the current paper.
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The purpose of this paper is to examine the predictability of nine filter rules and test the validity of the weak form of the efficient market hypothesis for the Qatar Stock…
Abstract
Purpose
The purpose of this paper is to examine the predictability of nine filter rules and test the validity of the weak form of the efficient market hypothesis for the Qatar Stock Exchange (QSE).
Design/methodology/approach
This study adopts the filter rule strategy employed by Fifield et al. (2005), which suggests that a buy signal occurs when a share’s price increases by X percent from the previous price. This strategy recommends that the share is held until its price declines by X percent from the subsequent high price. Any price changes below X percent are ignored. Additionally, using the theory of weak-form efficiency, this paper suggests that, if a stock market is efficient, an investor cannot achieve superior results by using these trading rules. However, if market inefficiencies are present, profitable opportunities may arise. To this end, the daily closing share prices of 44 companies listed on QSE are explored for 2004–2017.
Findings
The findings propose that QSE is not weak-form efficient because security prices are predictable. As such, investors who followed filter strategies based on past price information could have made profit. Sectoral analysis findings further suggest that firms in the consumer goods and services, industrial and insurance sectors are most efficiently priced amongst the QSE-traded companies.
Practical implications
The evidence may be plausibly helpful as supporting market participants and academics that suggest that selecting filter strategy is extremely important for determining the overall profitability of the trading strategy.
Originality/value
To the best of my knowledge, this is the first study on Qatar that examines the performance of filter rules relative to a passive investor in the context of trading rules with individual share prices for a new stock market. Furthermore, this study adds to the literature through the empirical finding that technical analysts using filter strategies could generate excess returns relative to the buy-and-hold strategy on new emerging stock markets. This study also suggests the levels of transparency and accounting disclosure are limited, which may help Qatari policy makers understand the QSE context. Therefore, it might lead them to introduce regulatory changes to improve the QSE’s efficiency level.
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JunHyeong Jin, JiHoon Jung and Kyojik Song
The authors test the weak-form efficiency in cryptocurrency markets using the most recent and comprehensive data as of 2021. The authors apply various technical indicators to take…
Abstract
The authors test the weak-form efficiency in cryptocurrency markets using the most recent and comprehensive data as of 2021. The authors apply various technical indicators to take a long or short position on 99 cryptocurrencies and compare the 10-day returns based on the technical trading strategies to the simple buy-and-hold returns. The authors find that the trading strategies based on single indicators or the combination of two indicators do not generate higher returns than buy-and-hold returns among cryptos. These findings suggest that cryptocurrency markets are weak-form efficient in general.
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Parvez Ahmed, Kristine Beck and Elizabeth Goldreyer
This paper studies the efficacy of using moving average technical trading rules with currencies of emerging economies. If technical trading rules are successful, they can become a…
Abstract
This paper studies the efficacy of using moving average technical trading rules with currencies of emerging economies. If technical trading rules are successful, they can become a risk management tool for multinational firms and investors in emerging markets. Typical risk management tools such as forwards, futures, and options are not sufficiently active in emerging currency markets. In this paper we use four Variable Length Moving Average (VMA) trading models and compare them to a simple buy and hold strategy. Results support the effectiveness of our trading models, which imply the presence of strong serial correlation among currency returns for emerging markets. As a result, the predictability of future currency prices will allow investors to create effective hedges in the often volatile emerging markets.
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James E. McNulty and Aigbe Akhigbe
Directors help determine the strategic direction of a corporation and are responsible for ensuring the institution has a good system of internal control. Banking institutions…
Abstract
Directors help determine the strategic direction of a corporation and are responsible for ensuring the institution has a good system of internal control. Banking institutions without a strategic direction emphasizing sound lending practices that promote the long-run financial health and viability of the institution will be sued more frequently than peer institutions. Institutions that do not have a good system of internal control will also be sued more frequently. Hence, legal expense is a bank corporate governance measure. We compare the performance of bank legal expense and a widely cited corporate governance index in a regression framework to determine which better predicts bank performance. The regressions indicate legal expense is a much better predictor, hence a better measure of bank corporate governance. Regulators should require legal expense reporting and rank institutions by the ratio of legal expense to assets to help identify institutions with weak governance. Seven case studies illustrate the role of legal expense in corporate governance.
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The purpose of this research was to examine the effectiveness of filter rules and investigate the weak form of the efficient market hypothesis (EMH) on sample shares of…
Abstract
Purpose
The purpose of this research was to examine the effectiveness of filter rules and investigate the weak form of the efficient market hypothesis (EMH) on sample shares of shariah-compliant vs. conventional banks listed on the Gulf Cooperation Council (GCC) stock market.
Design/methodology/approach
Nine trading filter strategies with different statistical analyses were used as defined in the literature (Fifield et al., 2005; Almujamed et al., 2018). Daily closing equity prices of a sample of twenty shariah-compliant banks and twenty conventional banks were recorded over the 18-year period ending 31 December 2017.
Findings
Shares of shariah-compliant banks in the GCC were not weak-form efficient since trading based on past information was predictable, profitable and outperformed the corresponding naïve buy-and-hold trading strategy. Shares of conventional GCC banks underperformed
Research limitations/implications
This paper’s findings should be useful for central banks and capital market authorities in GCC countries for evaluation when considering new regulations or process changes. Limitations include small sample numbers and need for more recent evaluations of accounting disclosure levels. A wider range of data, statistical analyses and other trading strategies is needed. Potential investors (Muslim and non-Muslim), shariah supervisory boards, and preparers of financial statements can benefit from this study.
Practical implications
The results suggest that selection of trading strategy affects the success of the rule and that mid-sized filters are the best.
Originality/value
This is an innovative study comparing performance of shariah-compliant and conventional banks under different filter rules.
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