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1 – 10 of over 40000Massoud 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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This research aimed to evaluate the predictability of moving-average strategies and examined the validity of the weak form of the efficient market hypothesis (EMH) for securities…
Abstract
Purpose
This research aimed to evaluate the predictability of moving-average strategies and examined the validity of the weak form of the efficient market hypothesis (EMH) for securities of banks listed in the Gulf Cooperation Council (GCC) stock markets of Bahrain, Kuwait, Qatar and Saudi Arabia.
Design/methodology/approach
Several statistical analyses and eight moving-average rules were employed where buy and sell signals were produced by comparing a security price’s short- and long-term moving averages. The study covered the daily closing share prices of 40 GCC-listed banks over the 18-year period ending 31 December 2017.
Findings
The results suggest that securities of banks in the GCC were not weak-form efficient because share prices were predictable. Investors who traded using moving-average strategies could generate higher profits. Analysis of variance found that securities of Kuwaiti banks were the most efficiently priced.
Practical implications
The findings supported the idea that profitability depended on the moving-average rules and country chosen. Transaction costs did not affect the returns obtained using different trading rules.
Originality/value
This work facilitates future evaluation of accounting disclosure environments as well as the market efficiency and the performance of securities in the GCC countries. The performance of moving average rules among representative countries that share similar characteristics was analyzed. Different market participants, including investors, analysts and regulators, can benefit from this study for decision-making. These results suggest that new regulations might be drafted that would improve the timeliness of accounting information and the banks’ level of efficiency.
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Muhannad A. Atmeh and Ian M. Dobbs
To investigate the performance of moving average trading rules in an emerging market context, namely that of the Jordanian stock market.
Abstract
Purpose
To investigate the performance of moving average trading rules in an emerging market context, namely that of the Jordanian stock market.
Design/methodology/approach
The conditional returns on buy or sell signals from actual data are examined for a range of trading rules. These are compared with conditional returns from simulated series generated by a range of models (random walk with a drift, AR (1), and GARCH‐(M)) and the consistency of the general index series with these processes is examined. Sensitivity analysis of the impact of transaction costs is conducted and standard statistical testing is extended through the use of bootstrap techniques.
Findings
The empirical results show that technical trading rules can help to predict market movements, and that there is some evidence that (short) rules may be profitable after allowing for transactions costs, although there are some caveats on this.
Originality/value
New results for the Jordanian market; use of sensitivity analysis to investigate robustness to variations in transactions costs.
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Louie Ren, Peter Ren and Yong Glasure
The purpose of this paper is to examine three different forms of returns based on the price difference, percentage change, and difference in logarithm price from moving average…
Abstract
Purpose
The purpose of this paper is to examine three different forms of returns based on the price difference, percentage change, and difference in logarithm price from moving average buy-sell trading rule. Statistical linear correlation, the means of returns from buy/sell days, and the flexibility of long-term moving periods are examined.
Design/methodology/approach
Traditional linear correlations, pairwise student t-test, and ϕ coefficient for two binary buy/sell decision variables are studied from the simple block bootstrap (convenience) sampling from S&P, Dow Jones, and NASDAQ price indices from January 29, 1985 to January 6, 2016.
Findings
The authors find that different forms of returns from MA(1-50) are strongly linearly correlated via 150 simple block bootstrap (convenience) samples from S&P, Dow Jones, and NASDAQ price indices from January 29, 1985 to January 6, 2016. In other words, the price differences, the percentage returns, and logarithmic returns are exchangeable for returns from S&P, Dow Jones, and NASDAQ. The authors refute the claims from Metghalchi et al.’s (2005, 2011) papers and Brock et al.’s (1992) paper. The authors conclude that the market is efficient and investors cannot gain benefits from moving average technical trading rule. Lastly, the authors find that the decisions from MA(1-50) and MA(1-200) are highly correlated; therefore, the length of periods used in long-period moving average is flexible.
Originality/value
It is one of the first studies about different forms of returns, their conclusions on the market efficiency, and the flexibility of long-term moving period for moving average buy/sell technical rules.
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J. WANG, B.M. BURTON and G.M. HANNAH
This study examines differences in the extent of predictability in the pricing of the two main classes of equity traded in China, namely: A shares (available to Chinese investors…
Abstract
This study examines differences in the extent of predictability in the pricing of the two main classes of equity traded in China, namely: A shares (available to Chinese investors) and B shares (traditionally available only to non‐Chinese investors). The study extends previous work by conducting a wider range of analyses and extending the sample period until the relaxation of rules preventing domestic investors from purchasing B shares. The results suggest that earlier evidence of greater predictability in the pricing of B shares is not entirely robust to changes in the method of analysis, and may only partially explain why Chinese authorities have recently decided to widen participation in the B market.
Massoud Metghalchi, Nazif Durmaz, Peggy Cloninger and Kamvar Farahbod
This paper aims to investigate popular technical trading rules (TTRs) applied to the FTSE Turkish all-cap and small-cap indexes from September 23, 2003 to August 9, 2019 to…
Abstract
Purpose
This paper aims to investigate popular technical trading rules (TTRs) applied to the FTSE Turkish all-cap and small-cap indexes from September 23, 2003 to August 9, 2019 to determine rules that produce net excess returns over the Buy-and-Hold strategy (B&H).
Design/methodology/approach
Five TTRs, namely, simple moving average, relative strength index, moving average convergence divergence, momentum, and rate of change, are applied, singly (one indicator) and in combination (two indicators) for multiple time periods.
Findings
For the small-cap index, some TTRs – including the famous Golden Cross, when the 50-day moving average rises above 200-day moving average – produced net annual excess returns (NAERs) over the B&H strategy, for the entire period and each sub-period, after accounting for risk and transaction costs. Results were mixed for the large-cap index. The results support Cakici and Topyan (2013).
Research limitations/implications
This study investigates several indicators, but future studies should examine others, especially based on volume and price.
Practical implications
Investors in the FTSE Turkish small-cap index may use some trading rules to earn NAERs over the B&H strategy.
Originality/value
This research is important because it addresses a gap in the research by examining numerous TTRs in the Turkish stock market. Studies of TTRs in Turkey are scarce.
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In this paper we conduct tests for two different trading rules, namely, the Dual Moving Average (DMA) model and the Channel Breakout (CHB) rule. These rules are tested across five…
Abstract
In this paper we conduct tests for two different trading rules, namely, the Dual Moving Average (DMA) model and the Channel Breakout (CHB) rule. These rules are tested across five futures contracts – the S&P 500, British Pound, US T‐Bonds, COMEX Gold and Corn using daily data over the period 1990 to 1998. Overwhelmingly, we find that the trading rules are unable to produce (gross or net) profits at any statistical level. While positive gross and net profits were available in four of the five markets, the profits were neither economically or statistically significant.
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Yung-Ho Chang, Chia-Ching Jong and Sin-Chong Wang
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.
Abstract
Purpose
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.
Design/methodology/approach
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.
Findings
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.
Originality/value
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.
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Midwest Independent Transmission System Operator, Inc. (MISO) is a nonprofit regional transmission organization (RTO) that oversees electricity production and transmission across…
Abstract
Midwest Independent Transmission System Operator, Inc. (MISO) is a nonprofit regional transmission organization (RTO) that oversees electricity production and transmission across 13 states and 1 Canadian province. MISO also operates an electronic exchange for buying and selling electricity for each of its five regional hubs.
MISO oversees two types of markets. The forward market, which is referred to as the day-ahead (DA) market, allows market participants to place demand bids and supply offers on electricity to be delivered at a specified hour the following day. The equilibrium price, known as the locational marginal price (LMP), is determined by MISO after receiving sale offers and purchase bids from market participants. MISO also coordinates a spot market, which is known as the real-time (RT) market. Traders in the RT market must submit bids and offers by 30minutes prior to the hour for which the trade will be executed. After receiving purchase and sale offers for a given hour in the RT market, MISO then determines the LMP for that particular hour.
The existence of the DA and RT markets allows producers and retailers to hedge against the large fluctuations that are common in electricity prices. Hedge ratios on the MISO exchange are estimated using various techniques. No hedge ratio technique examined consistently outperforms the unhedged portfolio in terms of variance reduction. Consequently, none of the hedge ratio methods in this study meet the general interpretation of FASB guidelines for a highly effective hedge.
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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