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Return Predictability and Market Efficiency: Evidence from the Bulgarian Stock Market

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  • Massoud Metghalchi
  • Massomeh Hajilee
  • Linda A. Hayes

Abstract

We applied three well-known technical indicators and one neglected indicator to the daily data for the Bulgarian Stock Index from November 21, 2003 to March 1, 2018. The results strongly support the predictive power of technical trading rules for the entire period and for each subperiod. This study includes a comprehensive evaluation that shows that it is possible to exploit this predictive power to beat the buy-and-hold strategy with respect to both risk and transaction costs. We identify four strategies, from lowest risk to highest risk, and find that trading by the 200 days moving average beat the profitability of the buy-and-hold strategy with respect to risk and one-way transaction cost by 1.76% for the entire period and each subperiod for Bulgaria.

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  • Massoud Metghalchi & Massomeh Hajilee & Linda A. Hayes, 2019. "Return Predictability and Market Efficiency: Evidence from the Bulgarian Stock Market," Eastern European Economics, Taylor & Francis Journals, vol. 57(3), pages 251-268, May.
    • Handle: RePEc:mes:eaeuec:v:57:y:2019:i:3:p:251-268
    DOI: 10.1080/00128775.2018.1542601
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    Cited by:

    1. Farhang Niroomand & Massoud Metghalchi & Massomeh Hajilee, 2020. "Efficient market hypothesis: a ruinous implication for Portugese stock market," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(4), pages 749-763, October.

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