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Are Nonlinear Trading Rules Profitable In The Chinese Stock Market?



    () (Department of Economics, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong)


    (Department of Economics, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong)


    (Applied Research Laboratories, University of Texas at Austin, USA)


The rise of China in the world economy has attracted a great deal of international attention. This paper investigates the performance of nonlinear self-exciting threshold autoregressive (SETAR) model-based trading rules in the Chinese stock market. We compare the performance of the SETAR model with the autoregressive (AR) model and the moving average (MA) trading rules. Our results indicate that trading rules are profitable in the B-share market, and that the nonlinear SETAR rule outperforms the other two linear rules in general.

Suggested Citation

  • Terence Tai-Leung Chong & Tau-Hing Lam & Melvin J. Hinich, 2009. "Are Nonlinear Trading Rules Profitable In The Chinese Stock Market?," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 1-20.
  • Handle: RePEc:wsi:afexxx:v:05:y:2009:i:01:n:s201049520950002x
    DOI: 10.1142/S201049520950002X

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    More about this item


    SETAR model; bootstrap; GARCH-M model; G11; G14;

    JEL classification:

    • 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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