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

Listed author(s):
  • Pereira, Pedro L. Valls

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

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File URL: http://bibliotecadigital.fgv.br/dspace/bitstream/10438/2188/1/TD%20181%20Pedro%20Valls.pdf
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Paper provided by FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil) in its series Textos para discussão with number 181.

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Date of creation: 26 Jan 2009
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.
  2. Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
  3. Andrew W. Lo & Harry Mamaysky & Jiang Wang, 2000. "Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation," Journal of Finance, American Finance Association, vol. 55(4), pages 1705-1770, 08.
  4. Chang, Eui Jung & Lima, Eduardo Jose Araujo & Tabak, Benjamin Miranda, 2004. "Testing for predictability in emerging equity markets," Emerging Markets Review, Elsevier, vol. 5(3), pages 295-316, September.
  5. Cheol-Ho Park & Scott H. Irwin, 2007. "What Do We Know About The Profitability Of Technical Analysis?," Journal of Economic Surveys, Wiley Blackwell, vol. 21(4), pages 786-826, 09.
  6. Cajueiro, Daniel O. & Tabak, Benjamin M. & Souza, Nathalia A., 2005. "Periodic market closures and the long-range dependence phenomena in the Brazilian equity market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 351(2), pages 512-522.
  7. Carol L. Osler & P.H. Kevin Chang, 1995. "Head and shoulders: not just a flaky pattern," Staff Reports 4, Federal Reserve Bank of New York.
  8. Jensen, Michael C., 1978. "Some anomalous evidence regarding market efficiency," Journal of Financial Economics, Elsevier, vol. 6(2-3), pages 95-101.
  9. Torres, Ricardo & Bonomo, Marco Antonio Cesar & Fernandes, Cristiano, 2002. "A Aleatoriedade do Passeio na Bovespa: Testando a Eficiência do Mercado Acionário Brasileiro," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 56(2), April.
  10. Jensen, Michael C & Bennington, George A, 1970. "Random Walks and Technical Theories: Some Additional Evidence," Journal of Finance, American Finance Association, vol. 25(2), pages 469-482, May.
  11. Saffi, Pedro A. C., 2003. "Análise Técnica: Sorte ou Realidade?," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 57(4), October.
  12. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  13. Cajueiro, Daniel O. & Tabak, Benjamin M., 2005. "Possible causes of long-range dependence in the Brazilian stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 345(3), pages 635-645.
  14. Brock, William & Lakonishok, Josef & LeBaron, Blake, 1992. " Simple Technical Trading Rules and the Stochastic Properties of Stock Returns," Journal of Finance, American Finance Association, vol. 47(5), pages 1731-1764, December.
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