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A Note on the Use of Moving Average Trading Rules to Test For Weak from Efficiency in Capital Markets

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Author Info
Alexandros E. Milionis () (Bank of Greece and University of the Aegean)
Evangelia Papanagiotou (University of the Aegean)
Abstract

This work focuses on the sensitivity of the performance of the moving average (MA) trading rule of technical analysis to changes in the MA length employed. Empirical analysis of daily data from NYSE, the Vienna Stock Exchange (VSE) and the Athens Stock Exchange (ASE) reveal high variability of the performance of the MA trading rule as a function of the MA length for all these markets, a result that weakens the conclusions of previous works, regarding the validity of the hypothesis of weak form market efficiency. Further, the trading rule is found to have predictive power in ASE and VSE, but not in NYSE.

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File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper200891.pdf
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Publisher Info
Paper provided by Bank of Greece in its series Working Papers with number 91.

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Length: 27 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:bog:wpaper:91

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Web page: http://www.bankofgreece.gr
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Related research
Keywords: Efficiency of Capital Markets; Technical Analysis Trading Rules with Moving Averages; Athens Stock Exchange; New York Stock Exchange; Vienna Stock Exchange.;

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions

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  1. Fang, Yue & Xu, Daming, 2003. "The predictability of asset returns: an approach combining technical analysis and time series forecasts," International Journal of Forecasting, Elsevier, vol. 19(3), pages 369-385. [Downloadable!] (restricted)
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  5. Alexakis, Panayotis & Xanthakis, Manolis, 1995. "Day of the Week Effect on the Greek Stock Market," Applied Financial Economics, Taylor and Francis Journals, vol. 5(1), pages 43-50, February. [Downloadable!] (restricted)
  6. Brock, William & Lakonishok, Josef & LeBaron, Blake, 1992. " Simple Technical Trading Rules and the Stochastic Properties of Stock Returns," Journal of Finance, American Finance Association, vol. 47(5), pages 1731-64, December. [Downloadable!] (restricted)
    Other versions:
  7. Bessembinder, Hendrik & Chan, Kalok, 1995. "The profitability of technical trading rules in the Asian stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 3(2-3), pages 257-284, July. [Downloadable!] (restricted)
  8. F. FernÁndez-RodrÍguez & S. Sosvilla-Rivero & J. Andrada-FÉlix, 2003. "Technical analysis in foreign exchange markets: evidence from the EMS," Applied Financial Economics, Taylor and Francis Journals, vol. 13(2), pages 113-122, January. [Downloadable!] (restricted)
  9. Neftci, Salih N, 1991. "Naive Trading Rules in Financial Markets and Wiener-Kolmogorov Prediction Theory: A Study of "Technical Analysis."," Journal of Business, University of Chicago Press, vol. 64(4), pages 549-71, October. [Downloadable!] (restricted)
  10. Laopodis, Nikiforos T., 2004. "Financial market liberalization and stock market efficiency: Evidence from the Athens Stock Exchange," Global Finance Journal, Elsevier, vol. 15(2), pages 103-123, August. [Downloadable!] (restricted)
  11. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December. [Downloadable!] (restricted)
  12. Dolado, Juan J & Jenkinson, Tim & Sosvilla-Rivero, Simon, 1990. " Cointegration and Unit Roots," Journal of Economic Surveys, Blackwell Publishing, vol. 4(3), pages 249-73.
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