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Do the technical indicators reward chartists? A study on the stock markets of China, Hong Kong and Taiwan

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  • Wing-Keung Wong

    ()
    (Department of Economics, National University of Singapore)

  • Jun Du

    (Department of Economics, National University of Singapore)

  • Terence Tai-Leung Chong

    (Department of Economics, The Chinese University of Hong Kong, Hong Kong)

Abstract

This paper studies the profitability of applying technical analysis that signals the entry and exit from the stock market in three Chinese stock markets - the Shanghai, Hong Kong and Taiwan Stock Exchanges. The Simple Moving Average (MA) and its extensions, Exponential MA, Dual MA, Triple MA, MACD and TRIX for both long and short strategies are examined. Applying the trading signals generated by the MA family to the Greater China markets, significantly positive returns are generated, which outperform the buy-and-hold strategy. The cumulative wealth obtained also surpasses that of the buy-and-hold strategy regardless of transaction costs. In addition, we study the performance of the MA family before and after the 1997 Asian Financial Crisis and find that the MA family works well in both sub-periods and in different market conditions of bull runs, bear markets and mixed markets. That technical analysis can forecast the directions of these markets implies that the three China stock markets are not efficient.

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Bibliographic Info

Paper provided by National University of Singapore, Department of Economics, SCAPE in its series SCAPE Policy Research Working Paper Series with number 0512.

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Date of creation: Nov 2005
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Handle: RePEc:sca:scaewp:0512

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Web page: http://www.fas.nus.edu.sg/ecs/scape/index.html
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Keywords: Technical analysis; Moving Average; buy-and-hold strategy;

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Cited by:
  1. Sanjeev K. Routray, 2006. "Two Kinds of Activism: Reflections on Citizenship in Globalising Delhi," Working Papers id:463, eSocialSciences.
  2. Michael McAleer & John Suen & Wing Keung Wong, 2013. "Profiteering from the Dot-com Bubble, Sub-Prime Crisis and Asian Financial Crisis," KIER Working Papers 869, Kyoto University, Institute of Economic Research.

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