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Technical Analysis Profitability Without Data Snooping Bias: Evidence from Chinese Stock Market
Author(s) -
Jiang Fuwei,
Tong Guoshi,
Song Guokai
Publication year - 2019
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/irfi.12161
Subject(s) - profitability index , technical analysis , sharpe ratio , trading strategy , stock market , econometrics , stock (firearms) , economics , market timing , financial economics , finance , portfolio , mechanical engineering , paleontology , horse , engineering , biology
We perform a comprehensive analysis on the profitability of a large number of technical analysis based trading rules in Chinese stock market. To counter data snooping bias, we employ a stepwise superior predictive ability test to identify genuinely profitable trading rules among more than 28,000 technical signals. Using 19 years of daily data on Chinese aggregate stock market return, we find substantial evidence on the profitability of technical trading rules measured by either the market timing ability or Sharpe ratio gain. Our results on the profitability of technical rules hold during different subperiods and remain valid under the presence of transaction costs.