IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v21y2011i6p421-436.html
   My bibliography  Save this article

A test of significance of the predictive power of the moving average trading rule of technical analysis based on sensitivity analysis: application to the NYSE, the Athens Stock Exchange and the Vienna Stock Exchange. Implications for weak-form market efficiency testing

Author

Listed:
  • A. E. Milionis
  • E. Papanagiotou

Abstract

In this article, an alternative testing procedure for the significance of the predictive power of the Moving Average (MA) trading rule of technical analysis is proposed and applied to the New York Stock Exchange (NYSE), the Athens Stock Exchange (ASE) and the Vienna Stock Exchange (VSE). In contrast to existing methodologies, for which significance testing is performed considering exclusively one combination of MA lengths each time, the one proposed in this article takes into account the variability of the performance of the MA trading rule by considering jointly the rule's cumulative returns using MAs at all lengths. More reliable testing of the hypothesis of weak-form market efficiency and more straightforward interpretation of results by investors are among the advantages of the proposed approach over the existing one. An application of the proposed methodology to capital markets for the period 1993 to 2005 shows that weak-form market efficiency is clearly accepted for the NYSE, is rejected for the ASE except for the last sub-period (2001 to 2005), while for the VSE, it is rejected for the first sub-period (1993 to 1997) and accepted for the other two sub-periods.

Suggested Citation

  • A. E. Milionis & E. Papanagiotou, 2011. "A test of significance of the predictive power of the moving average trading rule of technical analysis based on sensitivity analysis: application to the NYSE, the Athens Stock Exchange and the Vienna," Applied Financial Economics, Taylor & Francis Journals, vol. 21(6), pages 421-436.
    • Handle: RePEc:taf:apfiec:v:21:y:2011:i:6:p:421-436
    DOI: 10.1080/09603107.2010.532105
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603107.2010.532105
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09603107.2010.532105?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Senarathne Chamil W., 2020. "Are Religious Believers Irrational: A Direct Test from an Efficient Market Hypothesis," Financial Sciences. Nauki o Finansach, Sciendo, vol. 25(1), pages 35-53, March.
    2. Metghalchi, Massoud & Chen, Chien-Ping & Hayes, Linda A., 2015. "History of share prices and market efficiency of the Madrid general stock index," International Review of Financial Analysis, Elsevier, vol. 40(C), pages 178-184.
    3. Massoud Metghalchi & Linda A. Hayes & Farhang Niroomand, 2019. "A technical approach to equity investing in emerging markets," Review of Financial Economics, John Wiley & Sons, vol. 37(3), pages 389-403, July.
    4. Alexandros E. Milionis, 2019. "A simple return generating model in discrete time; implications for market efficiency testing," Working Papers 259, Bank of Greece.
    5. Farhang Niroomand & Massoud Metghalchi & Massomeh Hajilee, 2020. "Efficient market hypothesis: a ruinous implication for Portugese stock market," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(4), pages 749-763, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:21:y:2011:i:6:p:421-436. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAFE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.