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Tests of Technical Analysis in India

Author

Listed:
  • Sanjay Sehgal
  • Meenakshi Gupta

Abstract

The study evaluates the economic feasibility of technical analysis in the Indian stock market. It discusses that technical indicators do not outperform Simple Buy and Hold strategy on net return basis for individual stocks. Technical indicators seem to do better during market upturns compared to market downturns. However, technical based trading strategies are not feasible vis-Ã -vis passive strategy irrespective of market cycle conditions. Technical indicators also do not provide economically significant profit for industry as well as economy based data. Combining fundamentals with technical information, we find, that technical indicators are more profitable for small stocks compared to big stocks and for high value stocks compared to low value stocks. However, the economic feasibility of fundamentals' based technical strategies is still questionable. Our results seem to confirm with the efficient market hypothesis.

Suggested Citation

  • Sanjay Sehgal & Meenakshi Gupta, 2007. "Tests of Technical Analysis in India," Vision, , vol. 11(3), pages 11-23, July.
    • Handle: RePEc:sae:vision:v:11:y:2007:i:3:p:11-23
    DOI: 10.1177/097226290701100303
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    References listed on IDEAS

    as
    1. Basu, Sanjoy, 1983. "The relationship between earnings' yield, market value and return for NYSE common stocks : Further evidence," Journal of Financial Economics, Elsevier, vol. 12(1), pages 129-156, June.
    2. Banz, Rolf W., 1981. "The relationship between return and market value of common stocks," Journal of Financial Economics, Elsevier, vol. 9(1), pages 3-18, March.
    3. Andrew W. Lo & Harry Mamaysky & Jiang Wang, 2000. "Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation," Journal of Finance, American Finance Association, vol. 55(4), pages 1705-1765, August.
    4. Brock, William & Lakonishok, Josef & LeBaron, Blake, 1992. "Simple Technical Trading Rules and the Stochastic Properties of Stock Returns," Journal of Finance, American Finance Association, vol. 47(5), pages 1731-1764, December.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Naveen Kumar Baradi & Sanjay Mohapatra, 2014. "The Use of Technical and Fundamental Analyses By Stock Exchange Brokers: Indian Evidence," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 2(4), pages 190-203.

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    More about this item

    Keywords

    Technical Analysis; Bull Period; Moving Average; Oscillators; Size and Value Strategies; JEL Classification Codes: C10; C12; G11; G14;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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