The Predictability and Profitability of Simple Moving Averages and Trading Range Breakout Rules in the Pakistan Stock Market

Salma Khand (), Vivake Anand and Mohammad Nadeem Qureshi ()
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Salma Khand: Isra University, Pakistan
Vivake Anand: Isra University, Pakistan
Mohammad Nadeem Qureshi: Isra University, Pakistan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2020, vol. 23, issue 01, 1-38

Abstract: This paper inspects whether variable- and fixed-length moving averages (VMA and FMA), and trading range breakout (TRB) rules have prognostic capability and can earn profits superior to buy-and-hold plan, when applied on KSE-100 index of Pakistan stock market during the full sample period January 1, 1997 to December 31, 2013. Full sample results provided empirical evidence for VMA rule that it has significant predictive power and is able to generate profits superior to simple buy-and-hold plan even after inclusion of transaction costs. The highest mean buy returns yielded by VMA, FMA and TRB rules are seen in noncrises periods. The overall implication of this study is that traders in the Pakistan stock market can utilize this information to obtain excess returns on a regular basis.

Keywords: Technical analysis; variable-length moving average; fixed length moving average; trading range breakout; financial crisis; Pakistan stock market (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0219091520500010

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