Can Technical Indicators Provide Information for Future Volatility: International Evidence

Shi Yafeng (), Tao Xiangxing (), Shi Yanlong (), Zhu Nenghui (), Ying Tingting () and Peng Xun
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Shi Yafeng: School of Science, Ningbo University of Technology, Ningbo, 315211, China
Tao Xiangxing: School of Science, Zhejiang University of Science and Technology, Hangzhou, 310023, China
Shi Yanlong: Zhejiang Pharmaceutical College, Ningbo, 315100, China
Zhu Nenghui: School of Applied Mathematics, Xiamen University of Technology, Xiamen, 361024, China
Ying Tingting: Nottingham University Business School, University of Nottingham Ningbo China, Ningbo, 315100, China
Peng Xun: GuangDong Guangya High School, Guangzhou, 510160, China

Journal of Systems Science and Information, 2020, vol. 8, issue 1, 53-66

Abstract: We employ the static and dynamic copula models to investigate whether technical indicators provide information on volatility in the next trading day, where the volatility is measured by daily realized volatility. Our empirical results, based on long samples of 8 well-known stock indexes, suggest that a significant and asymmetric tail dependence between the technical indicators based on moving average and the next day volatility. The level of dependence change over time in a persistent manner. And the dependence structure presents some distinct differences between emerging market indexes and developed market indexes. These results indicate that the technical indicators can provide information on the next day volatility at extremes, and are less informative at normal market.

Keywords: volatility; technical indicator; tail dependence; copula; high frequency data (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:8:y:2020:i:1:p:53-66:n:4

DOI: 10.21078/JSSI-2020-053-14

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