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Noise traders, firm-specific uncertainty and technical trading effectiveness

Meifen Qian, Bin Yu and Qianyu Zhu

Applied Economics Letters, 2018, vol. 25, issue 13, 918-923

Abstract: This is the first study to document evidence of technical trading effectiveness at firm level in the Chinese A-share market by investigating the relationship between excess profits of technical trading rules and firm-specific characteristics. Our results reveal that firms with higher excess profits from technical trading have more noise traders and higher institutional ownership and that those firms tend to be growth firms with lower liquidity and higher firm-specific uncertainty. Further analysis shows that the profitability of technical trading rules is unsustainable and the excess profits of the highest technical trading profit quintile portfolio disappear in the following year.

Date: 2018
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