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The impact of data snooping on the testing of technical analysis: An empirical study of Asian stock markets

  • Chen, Cheng-Wei
  • Huang, Chin-Sheng
  • Lai, Hung-Wei
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    The primary aim of this study is to investigate the validity and predictability of technical analysis in eight Asian equity markets. We employ the bootstrap tests of White (2000) and Hansen (2005) to determine whether any superior trading rule is found to exist amongst the 'universe' of technical trading rules identified by Sullivan et al. (1999). We use these powerful bootstrap tests to ascertain the profitability of technical analysis, along with two institutional adjustments for non-synchronous trading and transaction costs. The empirical results indicate that these three elements, data snooping, non-synchronous trading and transaction costs, have significant impact on the overall performance of technical analysis; indeed, the results for these eight Asian stock markets support the efficient market hypothesis, demonstrating that the generation of economic profits through the use of technical analysis is extremely unlikely with these particular markets.

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    File URL: http://www.sciencedirect.com/science/article/B6W53-4X0PC13-1/2/e69c535e7ed072df879da5c60e425f75
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    Article provided by Elsevier in its journal Journal of Asian Economics.

    Volume (Year): 20 (2009)
    Issue (Month): 5 (September)
    Pages: 580-591

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    Handle: RePEc:eee:asieco:v:20:y:2009:i:5:p:580-591
    Contact details of provider: Web page: http://www.elsevier.com/locate/asieco

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    20. 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.
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    23. Bonser-Neal, Catherine & Linnan, David & Neal, Robert, 1999. "Emerging market transaction costs: Evidence from Indonesia," Pacific-Basin Finance Journal, Elsevier, vol. 7(2), pages 103-127, May.
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