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Data Snooping on Technical Analysis: Evidence from the Taiwan Stock Market

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  • Cheng-Wei Chen

    ()
    (Department of Agricultural Economics, National Taiwan University, No. 1, Sec. 4, Roosevelt Road, Taipei, 10617 Taiwan, R.O.C)

  • Chin-Sheng Huang

    ()
    (Department of Finance, National Yunlin University of Science and Technology, No. 123, Sec. 3, University Road, Douliou, Yunlin 64002, Taiwan, R.O.C.)

  • Hung-Wei Lai

    ()
    (Finance Division, Graduate School of Management, National Yunlin University of Science and Technology, No. 123, Sec. 3, University Road, Douliou, Yunlin 64002, Taiwan, R.O.C.)

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    Abstract

    The main purpose of this paper is to investigate the validity and predictability of technical analysis in the Taiwan stock market. Bootstrapped tests of White (2000) and of Hansen (2005) are employed to ascertain whether there exists a superior trading rule among two broadly used sets of technical analysis. One coming from Brock et al. (1992) and the other from Sullivan et al. (1999). Moreover, this study brings together powerful bootstrapped tests along with two institutional adjustments to ascertain the efficacy of technical analysis: (1) non-synchronous trading and (2) transaction costs. The empirical results indicate that this triad-data snooping, non-synchronous trading and transaction costs, has a great impact on the performance of technical analysis. In fact, the Taiwan stock market stands for market efficiency, and economical profits cannot be rendered from technical analysis in this market.

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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): 14 (2011)
    Issue (Month): 02 ()
    Pages: 195-212

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    Handle: RePEc:wsi:rpbfmp:v:14:y:2011:i:02:p:195-212

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    Related research

    Keywords: Technical analysis; bootstrapped test; data-snooping; stock market;

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