The Effectiveness Of Technical Analysis In The China A-share Market

The effectiveness of Technical analysis in the capital market has been the focus of technical analysis research. The validity of technical analysis includes prediction ability and profitability. After Fama put forward the efficient market hypothesis, the early academic study on the effectiveness of Technical analysis once believed that the capital market was efficient.Under the impact of the efficient market hypothesis, the effectiveness of technical analysis gradually questioned by the scholars, then a large number of efficient market hypothesis research and technical analysis of the effectiveness of the research emerged. Large of research about the effectiveness of technical analysis provided a number of supporting evidence since the 1990s. China stock markets is an emerging capital market, its development is not very mature, the degree of effectiveness are lower than the United States, Europe and other major mature markets. In this paper, based on in the early and recent study about the effectiveness of technical analysis, integrated recent price pattern recognition algorithm and testing methods,this research take November 30,2009 to October 31,2014 China stock market index and stock data as samples,study the effectiveness of The head and shoulder etc 8 kinds of common price pattern strategys and put forward pattern strategy fund based on the price pattern strategy.This research selects the November 30,2009 to October 31,2014 Shanghai A-share index, the HS300 index and its 100 stocks as the study sample. Based on the price of technology form recognition system Lo etc(2000)had put forward,we quantify 8 kinds of common complex graphics.according to the buying or selling signal that the price pattern generate, we can get daily return rate. We use K-S test to test whether the daily return rate under the conditions of the price pattern strategy and the unconditional daily return rate belong to the same distribution,namely whether the price pattern strategy has more information what can used to predict the stock price,and use simulation test to test whether price pattern strategy can get excess returns. this research result show that whatever the index or the stock market, some technical form are valid.For the different index, the effectiveness of the same price pattern strategy is different. For the same index, the effectiveness of different price pattern strategy is different, thus When we use price pattern strategy in index market, we need carefully to select the appropriate strategy to guide trade.This study show that A sell signal price pattern strategy is more effective than a buy signal price pattern strategy in the a-share index market in China.constructing technology strategy fund is an innovation of this article. The empirical result of stocks and index shows that matching the method of technical analysis with stock is a key to get transaction benefit.In this paper,according to the performance of 10 kinds of price pattern strategy in the 100 stocks,we construct strategy fund based on price pattern strategy. This solve the problem of matching stock with technical analysis method. It is an innovation of this article. In order to closer to the actual transactions and demonstrate the effectiveness of price pattern strategy, this paper divide sample into training sample and the out-sample. This study show that 10 kinds of strategy funds in the training set and out-sample both can obtain high annualised return rate.In addition, this paper also test whether strategy funds exist the excess return and whether this excess return is market risk compensation.This study use the rolling CAPM model to adjust conditional daily return rate.Under the condition of getting rid of Market risk compensation and transaction costs,TTOP and Tradeout strategy funds in the training set and out-sample still have high excess returns, this test that strategy funds exist the excess return and this excess return is not only market risk compensation.