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China's Stock Market Technical Analysis Of The Effectiveness Of Research

Posted on:2002-04-06Degree:MasterType:Thesis
Country:ChinaCandidate:H S TangFull Text:PDF
GTID:2206360032453647Subject:Quantitative Economics
Abstract/Summary:PDF Full Text Request
Tests of technical analysis efficiency have aroused great interest of researchers in stock markets. The relevant study in China, however, still lacks enough empirical proofs based on local data. In this paper, we study the technical analysis efficiency on the basis of recent discoveries as well as the data of Chinese stock market. First, we find that the negative autocorrelation induced by positive feedback traders increases (in absolute terms) with volatility, which in turn causes the positive autocorrelation of index stock returns to decrease with volatility and even turn to negative. It meanwhile shows that feedback traders induce greater predictability with past returns. Second, we find that expected returns are negatively related to turnover ratios in Chinese stock market. Furthermore, the return-turnover relationship is more profound (flat) when conditioned on an 搖p market?(a 揹own market? in the previous month, which is consistent with the 搇ead-lag?effect among stocks with different turnover ratios. This result also shows that turnover ratio plays a significant role in explaining and predicting stock returns. Third, and the last, we directly test the moving average rule. After controlling for the trading costs and risks we find that the efficiency of moving average rule is relevant to the time span it adopts and that the rules with shorter time span bring more excess returns. It also suggests the limitation of linear prediction methods we now usually use. In general, our study supports the conclusion that the technical analysis has some efficiency and stock returns are predictable, though fLn-ther study is as always expected.
Keywords/Search Tags:technical analysis efficiency, return predictability, feedback trading, turnover ratio, moving average rule, empirical study
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