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Predictability of Technical Trading Rules: Evidence from the Taiwan Stock Market

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  • Kung, James J.

Abstract

Using the Taiwan Stock Exchange Weighted Index from the first trading day in 1975 to the last trading day in 2007, we investigate the predictability of two popular technical rules (variable-length moving average and trading range breakout) in the Taiwan stock market and assess its bearing on market efficiency. Our results show that, for the two rules, returns from buy signals are generally higher than those from sell signals. In addition, they exhibit considerable predictive power over 1975-1985 and 1986-1996 but become less effective over 1997-2007. These results suggest that the financial reform and liberalization measures (particularly the QFII system) implemented since the early 1990s have contributed, to a certain extent, to the improved efficiency of the Taiwan stock market.

Suggested Citation

  • Kung, James J., 2009. "Predictability of Technical Trading Rules: Evidence from the Taiwan Stock Market," Review of Applied Economics, Review of Applied Economics, vol. 5(1-2).
  • Handle: RePEc:ags:reapec:143216
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Shan Wang & Zhi-Qiang Jiang & Sai-Ping Li & Wei-Xing Zhou, 2015. "Testing the performance of technical trading rules in the Chinese market," Papers 1504.06397, arXiv.org.
    2. Wang, Shan & Jiang, Zhi-Qiang & Li, Sai-Ping & Zhou, Wei-Xing, 2015. "Testing the performance of technical trading rules in the Chinese markets based on superior predictive test," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 439(C), pages 114-123.

    More about this item

    Keywords

    variable-length moving average; trading range breakout; financial reform and liberalization measures; Financial Economics; International Relations/Trade; Marketing; Public Economics; G14; G15;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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