The role of information uncertainty in moving-average technical analysis: A study of individual stock-option issuance in Taiwan

Chien-Hua Chen, Xuan-Qi Su and Jun-Biao Lin

Finance Research Letters, 2016, vol. 18, issue C, 263-272

Abstract: Using a sample of Taiwan stock market, this paper investigates the role of information uncertainty in the profitability of technical analysis by applying a moving average (MA) strategy to portfolios grouped according to whether firms issue stock options. Results indicate that, even though considering transaction costs, the MA strategy significantly outperforms the buy-and-hold strategy on the portfolio without option issuance, but not on the portfolio with option issuance. The results support the hypothesis that stocks that do not issue options exhibit greater information uncertainty, and thus greater price continuation, which in turn implies a superior performance of the MA strategy.

Keywords: Information uncertainty; Technical analysis; Moving average; Stock option; Price continuation (search for similar items in EconPapers)
JEL-codes: C61 G11 G12 G14 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:18:y:2016:i:c:p:263-272

DOI: 10.1016/j.frl.2016.04.026

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