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Is the Swedish stock market efficient? Evidence from some simple trading rules

  • Metghalchi, Massoud
  • Chang, Yung-Ho
  • Marcucci, Juri

In this paper we examine the profitability of some technical trading rules in the Swedish stock market over the 1986-2004 periods. The results indicate that moving average rules do indeed have predictive power and could discern recurring-price patterns for profitable trading, even after accounting for the effects of data snooping biases. To assess the profitability of different technical trading rules and strategies, we adopt White's [White, H. (2000). A Reality Check for data snooping, Econometrica, 68, 1097-1126.] Reality Check test that quantifies the data snooping bias adjusting for its effects. Our results also support the hypothesis that technical trading rules can outperform the buy-and-hold strategy even considering transaction costs.

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Article provided by Elsevier in its journal International Review of Financial Analysis.

Volume (Year): 17 (2008)
Issue (Month): 3 (June)
Pages: 475-490

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Handle: RePEc:eee:finana:v:17:y:2008:i:3:p:475-490
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620166

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  8. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
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  17. Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272, March.
  18. Lee, Chun I & Gleason, Kimberly C. & Mathur, Ike, 2001. "Trading rule profits in Latin American currency spot rates," International Review of Financial Analysis, Elsevier, vol. 10(2), pages 135-156.
  19. Josef Lakonishok, Seymour Smidt, 1988. "Are Seasonal Anomalies Real? A Ninety-Year Perspective," Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 403-425.
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  25. Halbert White, 2000. "A Reality Check for Data Snooping," Econometrica, Econometric Society, vol. 68(5), pages 1097-1126, September.
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