Ownership Restriction, Information Diffusion Speed, and the Performance of Technical Trading Rules in Chinese Domestic and Foreign Shares Markets
We examine the performance of technical trading rules in Chinese domestic A-share and foreign B-share markets. After controlling for non-synchronous trading and transaction costs, we find evidence to support the predictability and profitability of some of the most popular technical trading rules for B-shares but not for A-shares. However, after February 19, 2001, when domestic investors were allowed to trade B-shares, the predictive power of the trading rules in B-share markets disappeared. We conjecture that the predictability of technical trading rules in B-share markets can be attributed to the gradual diffusion of information among foreign investors under the foreign share ownership restriction, and, partly, to positive autocorrelations induced by thin trading.
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Volume (Year): 10 (2007)
Issue (Month): 04 ()
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