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Technical market indicators: An overview

Author

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  • Fang, Jiali
  • Qin, Yafeng
  • Jacobsen, Ben

Abstract

Current evidence on the predictability of technical analysis largely concentrates on price-based technical indicators such as moving averages rules and trading range breakout rules. In contrast, the predictability of widely used technical market indicators such as advance/decline lines, volatility indices, and short-term trading indices has drawn limited attention. Although some market indicators have also become popular sentiment proxies in the behavioral finance field to predict returns, the results generally rely on using just one or a few indicators at a time. This approach raises the risk of data snooping, since so many proxies are proposed. We review and examine the profitability of a wide range of 93 market indicators. We give these technical market indicators the benefit of the doubt, but even then we find little evidence that they predict stock market returns. This conclusion continuously holds even if we allow predictability to be state dependent on business cycles or sentiment regimes.

Suggested Citation

  • Fang, Jiali & Qin, Yafeng & Jacobsen, Ben, 2014. "Technical market indicators: An overview," Journal of Behavioral and Experimental Finance, Elsevier, vol. 4(C), pages 25-56.
    • Handle: RePEc:eee:beexfi:v:4:y:2014:i:c:p:25-56
    DOI: 10.1016/j.jbef.2014.09.001
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    Citations

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    Cited by:

    1. Martin Širůček & Karel Šíma, 2016. "Optimized Indicators of Technical Analysis on the New York Stock Exchange," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 64(6), pages 2123-2131.
    2. Zaremba, Adam & Szyszka, Adam & Karathanasopoulos, Andreas & Mikutowski, Mateusz, 2021. "Herding for profits: Market breadth and the cross-section of global equity returns," Economic Modelling, Elsevier, vol. 97(C), pages 348-364.
    3. Barua, Ronil & Sharma, Anil K., 2023. "Using fear, greed and machine learning for optimizing global portfolios: A Black-Litterman approach," Finance Research Letters, Elsevier, vol. 58(PC).

    More about this item

    Keywords

    Technical analysis; Market indicators; Sentiment indicators; Asset pricing;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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