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Can Technical Analysis Signals Detect Price Reactions Around Earnings Announcement?: Evidence from Indonesia

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  • Dedhy Sulistiawan
  • Jogiyanto Hartono

Abstract

This study examines whether technical analysis signals can detect price reactions before and after earnings announcement dates in Indonesian stock market. Earnings announcements produce reactions, both before and after the announcements. Informed investors may use private information before earnings announcements (Christophe, Ferri and Angel, 2004; Porter, 1992). Using technical analysis signals, this study expects that retail investors (uninformed investors) can detect preannouncements reaction. Technical analysis is selected because it is a powerful strategy, especially in developing stock market (Fifield, Power, and Sinclair.2005; Ahmed, Beck, and Goldreyer, 2000), including Indonesia (McKenzie, 2007). This study also examines technical analysis signals after earnings announcements. Using the idea that preannouncements reaction absorb post announcements reactions, this study expect that technical analysis signals difficult to detect price reaction after earnings announcements. Using Indonesian data over 2007-2011, the results show that technical analysis signal before earnings announcements can produce profit, but signals after earnings announcements do not produce same results. Using several different measures of return, the results are statistically robust. Based on those results, this study concludes that technical analysis signal can detect reaction before announcements, but the signals don’t work after earnings announcements. These findings contribute to accounting and technical analysis literatures.

Suggested Citation

  • Dedhy Sulistiawan & Jogiyanto Hartono, 2014. "Can Technical Analysis Signals Detect Price Reactions Around Earnings Announcement?: Evidence from Indonesia," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(1), pages 113-123.
    • Handle: RePEc:ibf:ijbfre:v:8:y:2014:i:1:p:113-123
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    Citations

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    Cited by:

    1. Jogiyanto Hartono & Dedhy Sulistiawan, 2015. "Performance Of Technical Analysis In Declining Global Markets," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 9(2), pages 41-52.
    2. Osama El Ansary & Mona Atuea, 2017. "Testing the Effect of Technical Analysis Strategies on Achieving Abnormal Return: Evidence from Egyptian Stock Market," Accounting and Finance Research, Sciedu Press, vol. 6(2), pages 1-26, May.

    More about this item

    Keywords

    Technical Analysis; Earnings Announcements;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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