Value Premium and Technical Analysis: Evidence from the China Stock Market

Keith S. K. Lam, Liang Dong and Bo Yu
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Keith S. K. Lam: Department of Finance and Business Economics, Faculty of Business Administration, University of Macau, Macau 999078, China
Liang Dong: Department of Finance and Business Economics, Faculty of Business Administration, University of Macau, Macau 999078, China
Bo Yu: Department of Finance and Business Economics, Faculty of Business Administration, University of Macau, Macau 999078, China

Economies, 2019, vol. 7, issue 3, 1-21

Abstract: We find value premium in the Chinese stock market using a conventional buy-and-hold approach which longs the portfolio with the highest BM ratio and shorts the one with the lowest BM ratio. Based on the finding, we test a new strategy by combining the value premium effect and technical analysis. During the sample period (1995 to 2015), we trade the objective portfolio or risk-free asset according to the moving average timing signals, and we find excess return from such a zero-cost trading strategy. We perform various robustness tests and find that the excess returns remain significantly positive after adjusting for risks (on three factor models) and transaction costs. In general, we find that the combined trading strategy can generate significant positive risk-adjusted returns after the transaction costs.

Keywords: value premium; technical analysis; moving average; China stock market (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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