Predictability of Equity Models
AbstractIn this study, we verify the existence of predictability in the Brazilian equity market. Unlike other studies in the same sense, which evaluate original series for each stock, we evaluate synthetic series created on the basis of linear models of stocks. Following Burgess (1999), we use the “stepwise regression” model for the formation of models of each stock. We then use the variance ratio profile together with a Monte Carlo simulation for the selection of models with potential predictability. Unlike Burgess (1999), we carry out White’s Reality Check (2000) in order to verify the existence of positive returns for the period outside the sample. We use the strategies proposed by Sullivan, Timmermann & White (1999) and Hsu & Kuan (2005) amounting to 26,410 simulated strategies. Finally, using the bootstrap methodology, with 1,000 simulations, we find strong evidence of predictability in the models, including transaction costs
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10955.
Date of creation: Jan 2009
Date of revision:
predictability; variance ratio profile; Monte Carlo simulation; reality check; bootstrap; technical analysis;
Other versions of this item:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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"“Ombro-Cabeça-Ombro”: Testando a Lucratividade do Padrão Gráfico de Análise Técnica no Mercado de Ações Brasileiro
[Head and Shoulder: testing the profitability of graphic pattern of tec," MPRA Paper 15653, University Library of Munich, Germany.
- Pereira, Pedro Luiz Valls, 2009. "“Ombro-cabeça-ombro” : testando a lucratividade do padrão gráfico de análise técnica no mercado de ações brasileiro," Textos para discussÃ£o 181, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
- Baptista, Ricardo Fuscaldi de Figueiredo & Pereira, Pedro Luiz Valls, 2009.
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173, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
- Baptista, Ricardo F. de F. & Valls Pereira, Pedro L., 2008.
"Análise do Desempenho de Regras de Análise Técnica Aplicada ao Mercado Intradiário do Contrato Futuro do Índice Bovespa
[Analysis of the performance of Technical Analysis startegies applied to," MPRA Paper 10351, University Library of Munich, Germany.
- Baptista, Ricardo F. de F. & Valls Pereira, Pedro L., 2008. "Análise do Desempenho de Regras de Análise Técnica Aplicada ao Mercado Intradiário do Contrato Futuro do Índice Bovespa
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