Location of Repository

An analysis of technical trading strategies\ud

By Kadida Ramadhani Shagilla Mashaushi

Abstract

This dissertation extends the literature on the efficacy of technical analysis in the direction of the `risk premium view' as an explanation for excess trading rule returns. First, we generally rely on the theoretical alternatives to the efficient market hypothesis which encourages possibilities for markets to be inefficient. We then\ud investigate the link between the risk involved in trading rule strategies and the resulting excess returns. The empirical analysis is based mainly on a sample of stocks drawn from the London Stock Exchange, (LSE), portfolios constructed from three US markets; the New York Stock Exchange, (NYSE), the American Stock Exchange, (ASE), and the National Association of Securities Dealers Automated\ud Quotation market, (NASDAQ). Data from ten small emerging markets of Africa is also used in empirical analyses.\ud \ud Focusing on documented evidence of differences in risk levels among several markets or market segments, the empirical analyses examined whether these risk differentials can explain excess trading rule profits as compensation for bearing risk. The empirical analyses find that, to a large extent, liquidity, book-to-market ratio,\ud and institutional arrangements can explain the excess profits from technical analysis. These empirical analyses are carried out in chapters three, four and six.\ud \ud As part of the analysis, I conduct empirical tests to assess the appropriateness of some risk estimates for trading rules. Using recently developed techniques, the\ud evidence in chapter five is consistent with the notion that certain risk estimates may not be appropriate for adjusting trading rule returns for risk

Publisher: Leeds University Business School
Year: 2006
OAI identifier: oai:etheses.whiterose.ac.uk:696

Suggested articles

Preview

Citations

  1. 91996) "Benefits and Limitations of Diversification Among Commodity Trading Advisors. " doi
  2. (1996). A Comprehensive Look at the Efficiency of Technical Trading Rules Applied to Cross-Rates. " doi
  3. (1990). A Comprehensive Test of Futures Market Disequilibrium. " Financial Review, doi
  4. (1996). A Note on the Weak Form Efficiency of Capital Markets: The Application of Simple Technical Trading Rules to UK Stock Prices - doi
  5. (1997). A Performance Comparison of a Technical Trading System with ARIMA Models for Soybean Complex Prices. "
  6. (1996). A Random Walk Down Wall Street. doi
  7. (1934). A Random-Difference Series for Use in the Analysis of Time Series. " doi
  8. (2000). A Reality Check for Data Snooping. " doi
  9. (1984). A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market. " doi
  10. (1969). A Source of Bias in Filter Tests of Share Prices. " doi
  11. (2000). A Survey of Market Practitioners' Views on Exchange Rate Dynamics. " doi
  12. (1988). A Test of Futures Market Disequilibrium Using Twelve Different Technical Trading Systems. " doi
  13. (1997). A theoretical analysis of trading rules: an application to the moving average case with Markovian returns. " doi
  14. (1958). A Theory of Anticipatory Prices.
  15. (1965). A. "Proof That Properly Anticipated Prices Fluctuate Randomly. "
  16. (1974). Adaptation, Information, and Dependence in Commodity Markets. " doi
  17. (1976). Adaptive Trading Rules for Commodity Futures. " doi
  18. (1985). Alternative to Sharpe Ratio Better Measure of Performance. "
  19. (1949). An Analysis of Speculative Trading in Grain Futures. "
  20. (2002). Analysis Explained.
  21. (2004). Are All Central Bank Interventions Created Equal? An Empirical Investigation. " doi
  22. (1993). Assessing Inefficiency in the S&P 500 Futures Market. " doi
  23. (2001). Asset Pricing. doi
  24. (2003). Asymptotic Tests of Composite Hypotheses. " Working Paper,
  25. (1986). Beating the Foreign Exchange Market. "
  26. (1998). Book-to-market ratios as predictors of market returns. " doi
  27. (1999). By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior. " doi
  28. (1984). Can Chartists Outperform the Market? Market Efficiency Tests for'Technical Analysis. "' doi
  29. (2004). Can Fuzzy Logic Make Technical Analysis 20/20? " doi
  30. (2001). Can Markov Switching Models Replicate Chartist Profits in the Foreign Exchange Market? " doi
  31. (1970). Commodity Futures: Trends or Random Walks? " doi
  32. (1993). Common Risk Factors in the Returns on Stocks and Bonds. " doi
  33. (1980). Conjectured Models for Trends in Financial Prices, Tests and Forecasts. " doi
  34. (1994). Contrarian Investment, Extrapolation and Risk" doi
  35. (2003). Currency Orders and Exchange Rate Dynamics: An Explanation for the Predictive Success of Technical Analysis. " doi
  36. (1988). Currency Speculation and Dollar Fluctuations. " Banca Nazionale del Lavoro Quarterly Review,
  37. (2001). Currency Traders and Exchange Rate Dynamics: A Survey of the US Market. " doi
  38. (2001). Dangers of Data-Mining: The Case of Calendar Effects in Stock Returns. " doi
  39. (1985). Data Mining as an Industry. doi
  40. (1983). Data Mining. doi
  41. (1990). Data Snooping Biases in Tests of Financial Asset Pricing Models. " Review of Financial Studies, doi
  42. (1999). Data Snooping, Technical Trading Rule Performance, and the Bootstrap. " doi
  43. (1981). Detecting Strange Attractors in Turbulence. " In Dynamical Systems doi
  44. (2002). Dividends, Nonsynchronous Prices, and the Returns from Trading the Dow Jones Industrial Average. " doi
  45. (1984). Do Technical Analysts Have Holes in Their Shoes? "
  46. (1997). Do Technical Trading Rules Generate Profits? Conclusions from the Intra-Day Foreign Exchange Market. " doi
  47. (1997). Does quoted depth predict intraday stock returns?: theory and evidence, http: //www.
  48. (2001). Effective Return, Risk Aversion and Drawdowns. " doi
  49. (1996). Effectiveness of Simple Technical Trading Rules in the Hong Kong Futures Markets. " doi
  50. (1989). Efficient Capital Markets and Martingales. "
  51. (1991). Efficient Capital Markets, doi
  52. (2004). Efficient Market Hypothesis and Forecasting. " doi
  53. (1994). Estimating the Effective Bid/Ask Spread from Time and Sales Data. " doi
  54. (2003). Evaluation with Shared Data Sets. "
  55. (1997). Examining the Use of Technical Currency Analysis. " doi
  56. (1989). Exchange-Traded Options and CRISMA Trading. " doi
  57. (1966). Filter Rules and Stock Market Trading. " doi
  58. (1970). Filter Tests of U. K. Share Prices. " doi
  59. (2001). Financial Returns and Efficiency as Seen by an Artificial Technical Analyst. " doi
  60. (2000). Forecasting and Trading Strategies Based on a Price Trend Model. " doi
  61. (1966). Forecasts of Future Prices, Unbiased Markets, and 'Martingale' Models. " doi
  62. (2000). Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation - Discussion. " doi
  63. (2000). Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation. " doi
  64. (2003). From Efficient Markets Theory to Behavioral Finance. " doi
  65. (1989). Further Evidence against the Efficiency of Futures Markets. " doi
  66. (2002). Further Evidence on Technical Trade Profitability and Foreign Exchange Intervention. " doi
  67. (2000). Further Insights on the Puzzle of Technical Analysis Profitability. " doi
  68. (1987). Futures Funds and Price Volatility. " The Review of Futures Markets, doi
  69. (1997). Futures Market Transaction Costs. " doi
  70. (1992). Genetic Programming: On the Programming of Computers by Means of Natural Selection. doi
  71. (2004). Have Trading Rule Profits in the Currency Markets Declined over Time? " doi
  72. (1995). Head and Shoulders: Not Just a Flaky Pattern. " Federal Reserve Bank of doi
  73. (2004). Hedge funds and the technology bubble. doi
  74. (1992). Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation. " doi
  75. (1960). High Finance in Copper. " doi
  76. (2000). High-Frequency Markov Switching Models in the Foreign Exchange Market. " doi
  77. (2000). How Do UK-Based Foreign Exchange Dealers Think Their Market Operates? " doi
  78. (1988). How Efficient are the Most Liquid Futures Contracts? " A Study of Treasury Bond Futures. " Review of Futures Markets,
  79. (2003). How Rewarding Is Technical Analysis? Evidence from Singapore Stock Market. " doi
  80. (2001). Importance of Technical and Fundamental Analysis in the European Foreign Exchange Market. " doi
  81. (1985). In Defense of Technical Analysis. " doi
  82. (1976). Information and Competitive Price Systems. "
  83. (2000). Intradaily Exchange Rate Movements. doi
  84. (2003). Intraday Technical Trading in the Foreign Exchange Market. " doi
  85. (1993). Investor preference for large firms: New evidence on economies of size, doi
  86. (1998). Investor Psychology and security market under and over reaction. " doi
  87. (1997). Is Technical Analysis Profitable in the Foreign Exchange Market? A Genetic Programming Approach. " doi
  88. (2003). Is Time-Series Based Predictability Evident in RealTime? " Working Paper, Krannert Graduate School of Management.
  89. (1991). Japanese Candlestick Charting Techniques.
  90. (1999). Linear, Non-linear and Essential Foreign Exchange Rate Prediction with Simple Technical Trading Rules. " doi
  91. (2006). Liquidity and Market Efficiency", Available at SSRN: http: //ssm. com/abstract=794264 doi
  92. (1998). Market Efficiency and the Returns to Technical Analysis. " doi
  93. (1998). Market Efficiency, Long-Term Returns, and Behavioral Finance. " doi
  94. (1995). Market Reactions to Several Popular Trend-Chasing Technical Signals. " doi
  95. (1994). Market Statistics and Technical Analysis: The Role of Volume. " doi
  96. (2002). Market Timing: A Test of a Charting Heuristic. " doi
  97. (1990). Martingales, and Market Efficiency. " doi
  98. (1988). Mean Reversion in Stock Prices: Evidence and Implications. " doi
  99. (1992). Measuring Abnormal Performance: Do Stocks Overreact? " doi
  100. (1981). Measuring Patterns of Price Movements in the Treasury Bill Futures Market. "
  101. (1999). Modeling the Demand-Price Relations in a High-Frequency Foreign Exchange Market. " doi
  102. (1986). Modelling Financial Time Series. doi
  103. (1968). Monthly Moving Averages - An Effective Investment Tool? " doi
  104. (1998). Moving Average Rules, Volume and the Predictability of Security Returns with Feedforward Networks. " doi
  105. (1996). Mutual fund performance. ", doi
  106. (1991). Naive Trading Rules in Financial Markets and Wiener-Kolmogorov Prediction Theory: A Study of 'Technical Analysis. "' doi
  107. (1962). New Concepts Concerning Futures Markets and Prices. "
  108. (1986). Noise. "
  109. (1996). On Futures: Technical Analysis.
  110. (2001). On Modeling Speculative Prices: The Empirical Literature. " doi
  111. (1987). On the Current State of the Stock Market Rationality Hypothesis.
  112. (1980). On the Dynamic Behavior of Prices in Disequilibrium. " doi
  113. (1981). On the Efficiency of the Markets for Gold and Silver. " doi
  114. (2003). On the Existence of Visual Technical Patterns in the UK Stock Market. " doi
  115. (1980). On the Impossibility of Informationally Efficient Markets. "
  116. (1998). Optimization of Technical Trading Strategies and the Profitability in Security Markets. " doi
  117. (1997). Persistent Profitability of Ttechnical Analysis on Foreign Exchange Markets? " Banca Nazionale del Lavoro Quarterly Review,
  118. (1998). Predictive Power of Price Patterns. " doi
  119. (1964). Price Movements in Speculative Markets: Trends or
  120. (1961). Price Movements in Speculative Markets: Trends or Random Walks. "
  121. (2001). Pricing under Asymmetric Information - Bubbles, Crashes, Technical Analysis, and Herding. doi
  122. (2002). Profits from Technical Trading Rules. doi
  123. (1984). Random Processes in Prices and Technical Analysis. " doi
  124. (1962). Random vs. Systematic Changes. "
  125. (1972). Random Walk and Price Trends: The Live Cattle Futures Market. " doi
  126. (1970). Random Walks and Technical Theories: Some Additional Evidence. " doi
  127. (1967). Random Walks: Reality or Myth. " doi
  128. (1982). Rational Expectations Equilibrium with Conditioning on Past Prices: A Mean-Variance Example. " doi
  129. (1979). Relative Strength Revisited. "
  130. (1981). Relative Strength: Further Positive Evidence" doi
  131. (1993). Returns to buying winners and selling losers: implications for stock market efficiency", doi
  132. (1992). Rewards Available to Currency Futures Speculators: Compensation for Risk or Evidence of Inefficient Pricing? " Economic Record, doi
  133. (2003). Risk-Adjusted, Ex Ante, Optimal Technical Trading Rules in Equity Markets. " doi
  134. (1988). Similarity of Computer Guided Technical Trading Systems. " doi
  135. (1992). Simple Technical Trading Rules and the Stochastic Properties of Stock Returns. " doi
  136. (1978). Some Anomalous Evidence Regarding Market Efficiency. " doi
  137. (1967). Speculative Prices as Random Walks - An Analysis of Ten Time Series of Flexible Exchange Rates. " doi
  138. (2005). Stock and Bond Pricing with Liquidity" http: //www. doi
  139. (2000). Stock Index and Price Dynamics in the UK and the US: New Evidence from a Trading Rule and Statistical Analysis. " doi
  140. (2002). Stock Market Trading Rule Discovery Using Technical Charting Heuristics. " Expert Systems with Applications, doi
  141. (2001). Stock Return Predictability: Is it there? ", Working Paper, doi
  142. (1986). Stock Return Variances: The Arrival of Information and the Reaction of Traders. "
  143. (2001). Technical Analysis and Central Bank Intervention. " doi
  144. (2002). Technical Analysis and the Effectiveness of Central Bank Intervention. " doi
  145. (2003). Technical Analysis in Foreign Exchange Markets: Evidence from the EMS. " doi
  146. (1999). Technical Analysis versus Market Efficiency -A Genetic Programming Approach. " doi
  147. (1997). Technical Analysis, Trading Volume and Market Efficiency: Evidence from an Emerging Market. " doi
  148. (1999). Technical Trading Rule Profitability and Foreign Exchange Intervention. " doi
  149. (1999). Technical Trading Rules in the European Monetary System. " doi
  150. (2001). Technical Trading Rules in the Spot Foreign Exchange Markets of Developing Countries. " doi
  151. (2002). Technical Trading Strategies and Return Predictability: NYSE. " doi
  152. (2002). Technical Trading-Rule Profitability, Data Snooping, and Reality Check: Evidence from the Foreign Exchange Market. " Working Paper,. doi
  153. (1994). Technical Trading: When It Works and When It Doesn't. " doi
  154. (1999). Testing the CRISMA Trading System: Evidence from the UK Market. " doi
  155. (1999). Tests of Technical Trading Strategies in the Emerging Equity Markets of Latin America and Asia. " doi
  156. (1980). The Arc Sine Law and the Treasury Bill Futures Market. " doi
  157. (1965). The Behaviour of Stock Market Prices, doi
  158. (1997). The Econometrics of Financial Markets. doi
  159. (1978). The Efficiency of the Market for Foreign Exchange under Floating Exchange Rates. " doi
  160. (1985). The Foreign Exchange Market in the 1980s.
  161. (1949). The Investigation of Economic Expectations.
  162. (1990). The Noise Trader Approach to Finance. " doi
  163. (1997). The Performance of Trading Rules on Four Asian Currency Exchange Rates. "
  164. (1986). The Persistence of Volatility and Stock Market Fluctuations. " doi
  165. (2003). The Predictability of Asset Returns: An Approach Combining Technical Analysis and Time Series Forecasts. " doi
  166. (2005). The predictive ability and profitability of technical trading rules: does company size matter?, " doi
  167. (1983). The Predictive Power in Relative Strength and CAPM. " doi
  168. (1971). The Predictive Significance of Five-Point Chart Patterns. " doi
  169. (2001). The Profitability of Moving Average Trading Rules in South Asian Stock Markets. " Emerging Markets Review, doi
  170. (1964). The Random Character of Stock Market Prices. doi
  171. (1967). The Random-Walk Theory: An Empirical Test. " doi
  172. (1981). The Relationship Between Return and Market Value of Common Stocks. " doi
  173. (1999). The specialist's quoted depth and limit order book. " doi
  174. (1978). The Speculative Behavior of Foreign Exchange Rates during the Current Float. " doi
  175. (1989). The Stability of Speculative Profits in the Foreign Exchanges. " doi
  176. (1991). The Survival of Noise Traders in Financial Markets. " doi
  177. (1989). The Theory and Practice of Futures Markets. doi
  178. (1998). The Use of Fundamental and Technical Analyses by Foreign Exchange Dealers: Hong Kong Evidence. " doi
  179. (1989). The Usefulness of Historical Data in Selecting Parameters for Technical Trading Systems. " doi
  180. (1985). The Weak Form Efficiency of the London Metal Exchange. " doi
  181. (1900). Theorie de la Speculation. doi
  182. (1989). Trade and the Revelation of Information through Prices and Direct Disclosure. " Review of Financial Studies, doi
  183. (2000). Trading and Hedging in S&P 500 Spot and Futures Markets Using Genetic Programming. " doi
  184. (1996). Trading Costs and the Relative Rates of Price Discovery in Stock, Futures, and Option Markets. " doi
  185. (1996). Trading Rule Profits in European Currency Spot CrossRates. " doi
  186. (2001). Trading Rule Profits in Latin American Currency Spot Rates. " International Review of Financial Analysis, doi
  187. (2000). Trading Rules and Stock Returns: Some Preliminary Short Run Evidence from the Hang Seng 1985-1997. " doi
  188. (1983). Trading Rules for Investors in Apparently Inefficient Futures Markets. " In Futures Markets - Modeling, Managing and Monitoring Futures Trading, doi
  189. (1998). Trading Systems and Methods,
  190. (2000). Transactions Data Tests of Efficiency: An Investigation in the Singapore Futures Markets. " doi
  191. (1957). Trend-Following Methods in Commodity Price Analysis. "
  192. (1999). Using Genetic Algorithms to Find Technical Trading Rules. "
  193. (1982). Using Mechanical Trading Systems to Evaluate the Weak form Efficiency of Futures Markets. "
  194. (2002). Why Technical Trading May Be Successful? A Lesson from the Agent-Based Modeling. " doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.