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Ownership Restriction, Information Diffusion Speed, and the Performance of Technical Trading Rules in Chinese Domestic and Foreign Shares Markets

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Listed:
  • Wei Li

    (School of Accounting and Finance, Hong Kong Polytechnic University, Kowloon, Hong Kong, China)

  • Steven Shuye Wang

    (School of Accounting and Finance, Hong Kong Polytechnic University, Kowloon, Hong Kong, China)

Abstract

We examine the performance of technical trading rules in Chinese domestic A-share and foreign B-share markets. After controlling for non-synchronous trading and transaction costs, we find evidence to support the predictability and profitability of some of the most popular technical trading rules for B-shares but not for A-shares. However, after February 19, 2001, when domestic investors were allowed to trade B-shares, the predictive power of the trading rules in B-share markets disappeared. We conjecture that the predictability of technical trading rules in B-share markets can be attributed to the gradual diffusion of information among foreign investors under the foreign share ownership restriction, and, partly, to positive autocorrelations induced by thin trading.

Suggested Citation

  • Wei Li & Steven Shuye Wang, 2007. "Ownership Restriction, Information Diffusion Speed, and the Performance of Technical Trading Rules in Chinese Domestic and Foreign Shares Markets," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 10(04), pages 585-617.
    • Handle: RePEc:wsi:rpbfmp:v:10:y:2007:i:04:n:s0219091507001215
    DOI: 10.1142/S0219091507001215
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    References listed on IDEAS

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    1. Jianping Mei & Jose A. Scheinkman & Wei Xiong, 2009. "Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia," Annals of Economics and Finance, Society for AEF, vol. 10(2), pages 225-255, November.
    2. Jianping Mei & Jose Scheinkman & Wei Xiong, 2005. "Speculative Trading and Stock Prices: An Analysis of Chinese A-B Share Premia," Levine's Bibliography 122247000000000867, UCLA Department of Economics.
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    Cited by:

    1. Valentina Galvani & Stuart Landon, 2013. "Riding the yield curve: a spanning analysis," Review of Quantitative Finance and Accounting, Springer, vol. 40(1), pages 135-154, January.
    2. Ansari Saleh Ahmar, 2019. "Sutte Indicator: an approach to predict the direction of stock market movements," Papers 1903.11642, arXiv.org.
    3. Ansari Saleh Ahmar, 2017. "Sutte Indicator: A Technical Indicator in Stock Market," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 223-226.

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    More about this item

    Keywords

    Technical trading rules; ownership restriction; information diffusion; non-synchronous trading; transaction costs; JEL Classification: G12; JEL Classification: G14; JEL Classification: G15;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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