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The Predictability and Profitability of Simple Moving Averages and Trading Range Breakout Rules in the Pakistan Stock Market

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  • Salma Khand

    (Isra University, Pakistan)

  • Vivake Anand

    (Isra University, Pakistan)

  • Mohammad Nadeem Qureshi

    (Isra University, Pakistan)

Abstract

This paper inspects whether variable- and fixed-length moving averages (VMA and FMA), and trading range breakout (TRB) rules have prognostic capability and can earn profits superior to buy-and-hold plan, when applied on KSE-100 index of Pakistan stock market during the full sample period January 1, 1997 to December 31, 2013. Full sample results provided empirical evidence for VMA rule that it has significant predictive power and is able to generate profits superior to simple buy-and-hold plan even after inclusion of transaction costs. The highest mean buy returns yielded by VMA, FMA and TRB rules are seen in noncrises periods. The overall implication of this study is that traders in the Pakistan stock market can utilize this information to obtain excess returns on a regular basis.

Suggested Citation

  • Salma Khand & Vivake Anand & Mohammad Nadeem Qureshi, 2020. "The Predictability and Profitability of Simple Moving Averages and Trading Range Breakout Rules in the Pakistan Stock Market," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 23(01), pages 1-38, March.
    • Handle: RePEc:wsi:rpbfmp:v:23:y:2020:i:01:n:s0219091520500010
    DOI: 10.1142/S0219091520500010
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    2. Yensen Ni, 2024. "Navigating Energy and Financial Markets: A Review of Technical Analysis Used and Further Investigation from Various Perspectives," Energies, MDPI, vol. 17(12), pages 1-22, June.

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