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Ombro-cabeça-ombro: testando a lucratividade do padrão gráfico de análise técnica no mercado de ações brasileiro

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  • Pereira, Pedro L. Valls

Abstract

Starting from an adapted version of Osler and Chang (1995) methodology, this article empirically evaluates the profitability of investment strategies based on identification of the Head and Shoulders chart pattern in the Brazilian stock market. For that purpose, several investment strategies conditioned by the identification of the Head and Shoulders pattern (in its basic and inverted forms) by a computer algorithm in daily price series of 47 stocks from January 1994 to August 2006 were defined. Confidence intervals consistent with the null hypothesis that no strategies with positive returns can be based only on historical data were constructed using the Bootstrap sample inference technique in order to test the predictive power of each strategy. More specifically, the mean returns obtained by each strategy when applied to the stocks price series were compared to those obtained by the same strategies when applied to 1.000 artificial price series - for each stock - generated by two widely used stock price models: Random Walk and E-GARCH. Overall, our results show that it is possible to create strategies conditioned by the occurrence of Head and Shoulders, with positive returns, which indicates that these patterns can capture from stock historical prices some signals about their future price trend which are neither explained by a Random Walk nor by an E-GARCH. Nevertheless, when the effects of taxes and transaction costs are considered, depending on their magnitude, these conclusions are maintained only for the pattern in its inverted form

Suggested Citation

  • Pereira, Pedro L. Valls, 2009. "Ombro-cabeça-ombro: testando a lucratividade do padrão gráfico de análise técnica no mercado de ações brasileiro," Textos para discussão 181, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
  • Handle: RePEc:fgv:eesptd:181
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    1. Baptista, Ricardo F. de F. & Valls Pereira, Pedro L., 2008. "Análise do Desempenho de Regras de Análise Técnica Aplicada ao Mercado Intradiário do Contrato Futuro do Índice Bovespa [Analysis of the performance of Technical Analysis startegies applied to Intr," MPRA Paper 10351, University Library of Munich, Germany.
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    Cited by:

    1. Rodrigo Chicaroli & Pedro L. Valls Pereira, 2015. "Predictability of Equity Models," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 34(6), pages 427-440, September.

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    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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