How rewarding is technical analysis in the Indian stock market?

Subrata Kumar Mitra

Quantitative Finance, 2011, vol. 11, issue 2, 287-297

Abstract: This paper analyses the profitability of moving average based trading rules in the Indian stock market using four stock index series. The study finds that most technical trading rules are able to capture the direction of market movements reasonably well and give significant positive returns both in long and short positions. But these returns cannot be exploited fully due to real world transaction costs. Although the transaction cost has come down over the years, various components of transaction costs due to the bid-ask spread, brokerage, etc. will never be zero. The trading rules based on short term moving averages may be able to detect trends in financial series very quickly, but those rules also generate a large number of trades causing higher transaction costs. Thus technical traders have to pay more attention to minimizing transaction costs while choosing a trading rule. Nevertheless, profit opportunities from technical analysis continue to remain an interesting and debatable issue in the Indian stock market.

Keywords: Trading strategies; Transaction costs; Technical trading; Trend recognition (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/14697680903493581 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:11:y:2011:i:2:p:287-297

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1080/14697680903493581

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().