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Do the technical indicators reward chartists? A study on the stock markets of China, Hong Kong and Taiwan

Wing-Keung Wong (), Jun Du and Terence Tai Leung Chong ()
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Jun Du: Department of Economics, National University of Singapore

SCAPE Policy Research Working Paper Series from National University of Singapore, Department of Economics, SCAPE

Abstract: This paper studies the profitability of applying technical analysis that signals the entry and exit from the stock market in three Chinese stock markets - the Shanghai, Hong Kong and Taiwan Stock Exchanges. The Simple Moving Average (MA) and its extensions, Exponential MA, Dual MA, Triple MA, MACD and TRIX for both long and short strategies are examined. Applying the trading signals generated by the MA family to the Greater China markets, significantly positive returns are generated, which outperform the buy-and-hold strategy. The cumulative wealth obtained also surpasses that of the buy-and-hold strategy regardless of transaction costs. In addition, we study the performance of the MA family before and after the 1997 Asian Financial Crisis and find that the MA family works well in both sub-periods and in different market conditions of bull runs, bear markets and mixed markets. That technical analysis can forecast the directions of these markets implies that the three China stock markets are not efficient.

Keywords: Technical analysis; Moving Average; buy-and-hold strategy (search for similar items in EconPapers)
JEL-codes: G1 C0 (search for similar items in EconPapers)
Date: 2005-11
New Economics Papers: this item is included in nep-cna, nep-fin, nep-fmk, nep-sea and nep-tra
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Journal Article: Do the technical indicators reward chartists? A study on the stock markets of China, Hong Kong and Taiwan (2005) Downloads
Working Paper: Do the technical indicators reward chartists? A study on the stock markets of China, Hong Kong and Taiwan (2005) Downloads
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