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Profiteering from the Dot-com Bubble, Sub-Prime Crisis and Asian Financial Crisis

  • Michael McAleer

    (Econometric Institute Erasmus School of Economics Erasmus University Rotterdam and Tinbergen Institute The Netherlands and Department of Quantitative Economics Complutense University of Madrid Spain and Institute of Economic Research Kyoto University Japan)

  • John Suen

    (Department of Statistics Chinese University of Hong Kong)

  • Wing Keung Wong

    (Department of Economics Hong Kong Baptist University)

This paper explores the characteristics associated with the formation of bubbles that occurred in the Hong Kong stock market in 1997 and 2007, as well as the 2000 dot-com bubble of Nasdaq. It examines the profitability of Technical Analysis (TA) strategies generating buy and sell signals with knowing and without trading rules. The empirical results show that by applying long and short strategies during the bubble formation and short strategies after the bubble burst, it not only produces returns that are significantly greater than buy and hold strategies, but also produces greater wealth compared with TA strategies without trading rules. We conclude these bubble detection signals help investors generate greater wealth from applying appropriate long and short Moving Average (MA) strategies.

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File URL: http://www.kier.kyoto-u.ac.jp/DP/DP869.pdf
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Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 869.

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Length: 44pages
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:kyo:wpaper:869
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