Investing Strategies for Trading Stocks as Overreaction Triggered by Technical Trading Rules with Big Data Concerns

Min-Yuh Day, Paoyu Huang, Yirung Cheng and Yensen Ni ()
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Min-Yuh Day: Graduate Institute of Information Management, National Taipei University, New Taipei 23741, Taiwan
Paoyu Huang: Department of International Business, Soochow University, Taipei 100006, Taiwan
Yirung Cheng: Department of Management Sciences, Tamkang University, New Taipei 251301, Taiwan
Yensen Ni: Department of Management Sciences, Tamkang University, New Taipei 251301, Taiwan

Journal for Economic Forecasting, 2023, issue 3, 148-161

Abstract: The meaning of technical indicators is to transmit overshooting signals, which lead investors to believe that they may beat the market when the overshooting signals have been triggered. The study aims to examine whether investors could exploit profits when the overreaction signals were revealed by some technical indicators. Meanwhile, several findings are exposed. First, momentum (contrarian) strategies are suggested as overbought (oversold) signals emitted, which differ from our cognition. Second, higher cumulative abnormal returns (CARs) are demonstrated for buying instead of selling the constituent stocks of SSE 50 when overshooting signs occurred, after comparing with those of DJIA 30 and FTSE 100. Third, since superior performance is revealed, investors may apply the BB trading rule instead of others as overreaction trading signals are emitted.

Keywords: Herding Behavior; Investing Strategies; Overreaction; Technical Indicators; Big Data (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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