Publication: Performance of technical trading rules: evidence from Southeast Asian stock markets
Issued Date
2015
Resource Type
Language
eng
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Mahidol University
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Springer
Bibliographic Citation
SpringerPlus. Vol.4, (2015), 552
Suggested Citation
Piyapas Tharavanij, Vasan Siraprapasiri, Kittichai Rajchamaha Performance of technical trading rules: evidence from Southeast Asian stock markets. SpringerPlus. Vol.4, (2015), 552. doi:10.1186/s40064-015-1334-7 Retrieved from: https://repository.li.mahidol.ac.th/handle/20.500.14594/2765
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Title
Performance of technical trading rules: evidence from Southeast Asian stock markets
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Abstract
This paper examines the profitability of technical trading rules in the five Southeast
Asian stock markets. The data cover a period of 14 years from January 2000 to December
2013. The instruments investigated are five Southeast Asian stock market indices:
SET index (Thailand), FTSE Bursa Malaysia KLC index (Malaysia), FTSE Straits Times index
(Singapore), JSX Composite index (Indonesia), and PSE composite index (the Philippines).
Trading strategies investigated include Relative Strength Index, Stochastic oscillator,
Moving Average Convergence-Divergence, Directional Movement Indicator and
On Balance Volume. Performances are compared to a simple Buy-and-Hold. Statistical
tests are also performed. Our empirical results show a strong performance of technical
trading rules in an emerging stock market of Thailand but not in a more mature stock
market of Singapore. The technical trading rules also generate statistical significant
returns in the Malaysian, Indonesian and the Philippine markets. However, after taking
transaction costs into account, most technical trading rules do not generate net
returns. This fact suggests different levels of market efficiency among Southeast Asian
stock markets. This paper finds three new insights. Firstly, technical indicators does
not help much in terms of market timing. Basically, traders cannot expect to buy at a
relative low price and sell at a relative high price by just using technical trading rules.
Secondly, technical trading rules can be beneficial to individual investors as they help
them to counter the behavioral bias called disposition effects which is the tendency
to sell winning stocks too soon and holding on to losing stocks too long. Thirdly, even
profitable strategies could not reliably predict subsequent market directions. They
make money from having a higher average profit from profitable trades than an average
loss from unprofitable ones.