Market Efficiency and Returns to Simple Technical Trading Rules: Further Evidence from U.S., U.K., Asian and Chinese Stock Markets
First Online: 21 July 2006 DOI:
Cite this article as: Cai, B.M., Cai, C.X. & Keasey, K. Asia-Pacific Finan Markets (2005) 12: 45. doi:10.1007/s10690-006-9012-y Abstract
Tian, Wan and Guo (2002) explored the predictability and profitability of technical trading rules in markets with different efficiency levels; namely, the U.S. and China. In the case of the U.S. they found rules to have no predictability after 1975, whereas their results give support to technical trading rules having both predictability and profitability for the Chinese markets across the 1990's. The purpose of this paper is to extend the analysis of Tian et al. in two ways. First, to see if the conclusions extend to other markets – namely, the U.K., Hong Kong and Japan. Second, in the case of China, to examine whether the predictability and profitability of technical trading rules changed across the 1990's. On the basis of daily data Tian et al's results for the U.S. market are supported by the results for a number of the main developed markets where the technical trading rules had predictive ability during the 1970's that disappeared by the 1990's. Furthermore, the results suggest that while technical trading rules had short term predictive ability and profitability in the Chinese stock markets during the 1990's, this lessened as the decade progressed.
Keywords technical trading rules market evolution Chinese stock markets JEL Classification: G14, G15 References
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