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Return predictability in emerging equity market sectors

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  • Andrei Shynkevich

Abstract

This article investigates the predictive power of technical trading rules in the emerging equity market sector portfolios and finds that trading strategies based on technical indicators significantly outperform the buy-and-hold benchmark. Combination of data snooping bias, data measurement errors in the form of non-synchronicity bias and fluctuations in currency exchange rates is unable to explain the observed outperformance. The introduction of transaction costs tempers the results but technical analysis still possesses significant predictive power for a number of sectors. The performance of technical analysis in the emerging equity market sectors does not conform to historical trends observed in the developed equity markets as well as in the emerging equity markets when broadly diversified portfolios are considered, where predictive power of technical trading rules has been shown to decline over time.

Suggested Citation

  • Andrei Shynkevich, 2017. "Return predictability in emerging equity market sectors," Applied Economics, Taylor & Francis Journals, vol. 49(5), pages 433-445, January.
    • Handle: RePEc:taf:applec:v:49:y:2017:i:5:p:433-445
    DOI: 10.1080/00036846.2016.1200182
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    Cited by:

    1. 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.
    2. Tihana Škrinjarić & Zrinka Orlović, 2020. "Economic Policy Uncertainty and Stock Market Spillovers: Case of Selected CEE Markets," Mathematics, MDPI, vol. 8(7), pages 1-33, July.

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