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Are technical trading strategies still profitable? Evidence from the Taiwan Stock Index Futures Market

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  • Yi-Chein Chiang
  • Mei-Chu Ke
  • Tung Liang Liao
  • Cin-Dian Wang

Abstract

This study is the first to use stochastic dominance theory to compare the performance of passive and active trading strategies for the Taiwan Stock Index Futures. In total, we test nine common trading strategies, including buy-and-hold (passive) and eight technical trading strategies (active). The results show that the Relative Strength Index (RSI) oscillator and parabolic strategies outperform the other technical trading strategies, and all of the eight technical trading strategies beat the buy-and-hold strategy both before and after transaction costs. In addition, investing a portion of investors’ money in risky assets and a portion in risk-free assets can help distinguish performance among the trading strategies. This implies that the stochastic dominance theory can help investors determine an optimal asset allocation.

Suggested Citation

  • Yi-Chein Chiang & Mei-Chu Ke & Tung Liang Liao & Cin-Dian Wang, 2012. "Are technical trading strategies still profitable? Evidence from the Taiwan Stock Index Futures Market," Applied Financial Economics, Taylor & Francis Journals, vol. 22(12), pages 955-965, June.
  • Handle: RePEc:taf:apfiec:v:22:y:2012:i:12:p:955-965
    DOI: 10.1080/09603107.2011.631893
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    File URL: http://hdl.handle.net/10.1080/09603107.2011.631893
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    Cited by:

    1. Ni, Yensen & Liao, Yi-Ching & Huang, Paoyu, 2015. "MA trading rules, herding behaviors, and stock market overreaction," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 253-265.
    2. Niu, Cuizhen & Wong, Wing-Keung & Zhu, Lixing, 2016. "First Stochastic Dominance and Risk Measurement," MPRA Paper 75027, University Library of Munich, Germany.

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