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Testing the Predicting Ability of Technical Analysis Classical Patterns in the Egyptian Stock Market

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  • Osama El-Ansary
  • Dina Mohssen

Abstract

As an emerging market, Egyptian stock market is characterized by inefficiency which is confirmed empirically in this research. This provoked us to test the ability of technical analysis classical patterns in predicting the future returns through calculating the expected price target consequently the expected future return and compare it with the actual return.Statistical techniques and models including Box Pierce (Ljung-Box), Variance ratio test, Runs test, and t-test bootstrapping technique have been applied to test the research proposed hypotheses. The empirical results revealed that the Egyptian stock market is inefficient as returns don’t follow random walk and are dependent, it is found also that the actual returns have significantly exceeded the expected returns of the detected patterns indicating that classical patterns can perfectly predict the direction of the price movements rather than the exact price targets.

Suggested Citation

  • Osama El-Ansary & Dina Mohssen, 2017. "Testing the Predicting Ability of Technical Analysis Classical Patterns in the Egyptian Stock Market," Accounting and Finance Research, Sciedu Press, vol. 6(3), pages 1-94, August.
    • Handle: RePEc:jfr:afr111:v:6:y:2017:i:3:p:94
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    References listed on IDEAS

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    1. 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.
    2. Salman Syed Ali & Khalid Mustafa, 2001. "Testing Semi-strong Form Efficiency of Stock Market," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 651-674.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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