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An analysis of trading strategies in eleven European stock markets

  • Suzanne Fifield
  • David Power
  • C. Donald Sinclair
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    In recent years, the validity of the weak form efficient market hypothesis (EMH) has been called into question as several studies have uncovered evidence that technical trading rules have predictive ability with respect to both developed and emerging stock market indices. This study analyses the forecasting power of 2 of the most popular trading rules using index data for a selection of 11 European stock markets over the January 1991 to December 2000 period. The findings indicate that the emerging markets included in this paper are informationally inefficient; these markets displayed some degree of predictability in their share returns, although the developed markets did not. Furthermore, the results point to large differences in the performance of the rules examined; while small size filters consistently outperformed the buy-and-hold strategy in the emerging markets examined even after the consideration of transaction costs, the performance of the moving average rules was erratic and varied dramatically from market to market.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/1351847042000304099
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    Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

    Volume (Year): 11 (2005)
    Issue (Month): 6 ()
    Pages: 531-548

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    Handle: RePEc:taf:eurjfi:v:11:y:2005:i:6:p:531-548
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    1. Bessembinder, Hendrik & Chan, Kalok, 1995. "The profitability of technical trading rules in the Asian stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 3(2-3), pages 257-284, July.
    2. Brock, W. & Lakonishok, J. & Lebaron, B., 1991. "Simple Technical Trading Rules And The Stochastic Properties Of Stock Returns," Working papers 90-22, Wisconsin Madison - Social Systems.
    3. Hendrik Bessembinder & Kalok Chan, 1998. "Market Efficiency and the Returns to Technical Analysis," Financial Management, Financial Management Association, vol. 27(2), Summer.
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