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Can investors profit by utilizing technical trading strategies? Evidence from the Korean and Chinese stock markets

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Listed:
  • Yensen Ni

    (Tamkang University)

  • Min-Yuh Day

    (National Taipei University)

  • Yirung Cheng

    (Tamkang University)

  • Paoyu Huang

    (Soochow University)

Abstract

The idea of this study is derived from observing the profitability of stock investments following the phenomena of continuously rising (or falling) prices of stocks and continuously overbought (or oversold) signals emitted by technical indicators. We employ the standard event study approach and technical trading strategies to explore whether investors would exploit profits in trading the constituent stocks of the Korea Composite Stock Price Index 50 and Shanghai Stock Exchange 50 when the aforementioned continuous phenomena occur. We find that both the Korean and Chinese stock markets are not fully efficient; this finding may enhance the robustness of the existing literature. In addition, we reveal that contrarian strategies are appropriate for the trading stocks listed on the Korean stock market for all the cases investigated in this study. However, momentum strategies are appropriate for the Chinese stock market when continuously rising stock prices and overbought signals are simultaneously observed. These findings imply that the difference in investor behaviors between the Korean and Chinese stock markets might result in dissimilar trading strategies being employed for these two markets.

Suggested Citation

  • Yensen Ni & Min-Yuh Day & Yirung Cheng & Paoyu Huang, 2022. "Can investors profit by utilizing technical trading strategies? Evidence from the Korean and Chinese stock markets," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-21, December.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-022-00358-1
    DOI: 10.1186/s40854-022-00358-1
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