Wei Li () (School of Accounting and Finance, Hong Kong Polytechnic University, Kowloon, Hong Kong, China) Steven Shuye Wang () (School of Accounting and Finance, Hong Kong Polytechnic University, Kowloon, Hong Kong, China)
Abstract
We examine the performance of technical trading rules in Chinese domestic A-share and foreign B-share markets. After controlling for non-synchronous trading and transaction costs, we find evidence to support the predictability and profitability of some of the most popular technical trading rules for B-shares but not for A-shares. However, after February 19, 2001, when domestic investors were allowed to trade B-shares, the predictive power of the trading rules in B-share markets disappeared. We conjecture that the predictability of technical trading rules in B-share markets can be attributed to the gradual diffusion of information among foreign investors under the foreign share ownership restriction, and, partly, to positive autocorrelations induced by thin trading.
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