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History of share prices and market efficiency of the Madrid general stock index

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  • Metghalchi, Massoud
  • Chen, Chien-Ping
  • Hayes, Linda A.

Abstract

We apply Moving Average (MA), Relative Strength Indicator (RSI), Moving Average Convergence Divergence (MACD), and trading breakout (TBO) techniques to investigate the weak-form market efficiency of the Madrid General Stock Index, Índice General de la Bolsa de Madrid (IGBM), from 1/2/1975 to 12/31/2012. The empirical results not only strongly validate the predictive power of trading rules with robust statistical significance in all three sub-periods over the thirty-eight years, but also provide the possible strategies to outperform the buy-and-hold strategy with the consideration of transaction costs and risk. This supports the argument against weak-form market efficiency of the IGBM.

Suggested Citation

  • Metghalchi, Massoud & Chen, Chien-Ping & Hayes, Linda A., 2015. "History of share prices and market efficiency of the Madrid general stock index," International Review of Financial Analysis, Elsevier, vol. 40(C), pages 178-184.
  • Handle: RePEc:eee:finana:v:40:y:2015:i:c:p:178-184
    DOI: 10.1016/j.irfa.2015.05.016
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    Cited by:

    1. Shahzad, Syed Jawad Hussain & Nor, Safwan Mohd & Mensi, Walid & Kumar, Ronald Ravinesh, 2017. "Examining the efficiency and interdependence of US credit and stock markets through MF-DFA and MF-DXA approaches," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 471(C), pages 351-363.
    2. repec:eee:intfin:v:52:y:2018:i:c:p:102-113 is not listed on IDEAS

    More about this item

    Keywords

    Technical analysis; Trading indicators; Market efficiency; Buy and hold strategy;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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