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Ownership Restriction, Information Diffusion Speed, and the Performance of Technical Trading Rules in Chinese Domestic and Foreign Shares Markets

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Author Info

  • 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)

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    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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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Review of Pacific Basin Financial Markets and Policies.

    Volume (Year): 10 (2007)
    Issue (Month): 04 ()
    Pages: 585-617

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    Handle: RePEc:wsi:rpbfmp:v:10:y:2007:i:04:p:585-617

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    Related research

    Keywords: Technical trading rules; ownership restriction; information diffusion; non-synchronous trading; transaction costs; JEL Classification: G12; JEL Classification: G14; JEL Classification: G15;

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