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- Title
Can Technical Analysis Boost Stock Returns? Evidence from China Stock Market.
- Authors
Danna Zhao; Yang Xuan; Fa-Hsiang Chang
- Abstract
This paper focuses on the role of technical analysis which can provide effective buy and sell signals to boost stock returns. More specifically, we focus on the momentum phenomenon which is one of the toughest market anomalies that against the efficient market hypothesis. By using the versatile momentum oscillators, we establish several trading strategies and introduce test statistics to examine the performance of trading strategies. Relative Strength Index (RSI) can be used to measure the relative strength and weakness of a stock based on the closing prices during a certain trading period, and Average Directional Movement Index (ADX) is used to quantify the strength of an existing trend. In this paper, we apply the designed buying and selling strategies which consist of several indicators such as the RSI and the ADX to 5 stock indexes in China's Stock Market from 2010 to 2016. Simulation results show that our trading strategies can generate significant positive returns, in general. Hence, we conclude that technical analysis based on historical data does increase the stock returns, and the prices of the stock cannot reflect all market information.
- Subjects
CHINA; INVESTMENT analysis; STOCK exchanges; HYPOTHESIS; RELATIVE strength index (Securities); INFORMATION &; communication technologies
- Publication
Journal of Emerging Issues in Economics, Finance & Banking, 2018, Vol 7, Issue 1, p2400
- ISSN
2306-367X
- Publication type
Article