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How Rewarding Is Technical Analysis? Evidence From Singapore Stock Market

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Author Info

  • Wing-Keung Wong

    ()
    (National University of Singapore)

  • Meher Manzur

    (Curtin University of Technology)

  • Boon-Kiat Chew

    (EFG Private Bank SA Switzerland)

Abstract

This paper focuses on the role of technical analysis in signalling the timing of stock market entry and exit. Test statistics are introduced to test the performance of the most established of the trend followers, the Moving Average, and the most frequently used counter-trend indicator, the Relative Strength Index. Using Singapore data, the results indicate that the indicators can be used to generate significantly positive return. It is found that member firms of Singapore Stock Exchange (SES) tend to enjoy substantial profits by applying technical indicators. This could be the reason why most member firms do have their own trading teams that rely heavily on technical analysis.

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Bibliographic Info

Paper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0216.

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Length: 21 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:nus:nusewp:wp0216

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  1. Robert J. Shiller, 1984. "Stock Prices and Social Dynamics," Cowles Foundation Discussion Papers 719R, Cowles Foundation for Research in Economics, Yale University.
  2. Wing-Keung Wong & Boon-Kiat Chew & Douglas Sikorski, 2002. "Can the Forecasts Generated from E/P Ratio and Bond Yield be Used to Beat Stock Markets?," Departmental Working Papers wp0201, National University of Singapore, Department of Economics.
  3. Wong, Wing-Keung & Bian, Guorui, 2005. "Estimating parameters in autoregressive models with asymmetric innovations," Statistics & Probability Letters, Elsevier, vol. 71(1), pages 61-70, January.
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  9. Frankel, Jeffrey A & Froot, Kenneth A, 1990. "Chartists, Fundamentalists, and Trading in the Foreign Exchange Market," American Economic Review, American Economic Association, vol. 80(2), pages 181-85, May.
  10. Robert J. Shiller, 1987. "Investor Behavior in the October 1987 Stock Market Crash: Survey Evidence," NBER Working Papers 2446, National Bureau of Economic Research, Inc.
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  12. Andrew W. Lo & Harry Mamaysky & Jiang Wang, 2000. "Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation," NBER Working Papers 7613, National Bureau of Economic Research, Inc.
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  15. Jensen, Michael C & Bennington, George A, 1970. "Random Walks and Technical Theories: Some Additional Evidence," Journal of Finance, American Finance Association, vol. 25(2), pages 469-82, May.
  16. Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November.
  17. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-73, April.
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