Testing the robustness of moving average distance in the ASEAN stock markets

Several researches have provided empirical evidence that moving average distance (MAD) can be used in predicting equity returns focusing on developed markets. These ultimately challenge the proposition of the efficient market hypothesis (EMH) theory that historical prices cannot be used to create a strategy to predict returns. This study aims to test the robustness of moving average distance in the ASEAN stock markets using a statistical method that runs all possible combinations of the regressors. The Bayesian Model Averaging (BMA) approach is employed for fifteen control variables namely moving average distance signal (MDS), 200-day moving average signal, MAD threshold signal, moving average convergence divergence, momentum, market value of equity, book-to-market ratio, turnover, 52-week high, net stock issues, return on equity, return on assets, gross profitability, asset growth, and volatility on a monthly timeframe throughout January 2010 - January 2020 with a sample of 4, 524 firms. With BMA, thousands of regression combinations are estimated and results suggest that MAD is a robust predictor in the Philippines, Thailand, and Vietnam. Employing both Fama-Macbeth regressions and BMA, this study concludes that EMH is not evident in the three countries and there is anchoring in the trading indicators considered