a literature review of technical analysis on stock markets pdf

a literature review of technical analysis on stock markets pdf插图

Is there an academic literature on technical analysis of stock markets?

This study aimed to review the academic literature on technical analysis, considering stock markets. Earlier studies have also presented a literature review of technical analysis, including Menkhoff and Taylor (2007) and Park and Irwin (2007).

How does this paper contribute to the existing literature on technical analysis?

Our paper contributes to the existing literature on technical analysis by presenting an overview of characteristics of the literature and potential knowledge gaps in this area, focusing on the analysis of stocks. The paper also discusses suggestions for future research in technical analysis. you can request a copy directly from the authors. …

What is technical analysis in financial markets?

In financial markets, technical analysis provides a framework for informing investment management decisions by applying a supply and demand methodology to market prices. Technical analysts employ a disciplined, systematic approach that seeks to minimize the impact of behavioral biases and emotions that could adversely affect investment performance.

Does business literature promote rational decision-making in the stock market?

… Business literature in the stock market domain usually promotes a rational approach for decision-making, as seen in the large body of literature on technical analysis (Farias Nazrio et al., 2017; Lin et al., 2018;Lin, 2018).

How does palm oil affect Indonesia?

The palm oil industry has a strategic role in economic development in Indonesia, especially in alleviating poverty and creating other businesses that can support the industry. Operational activities in the palm oil industry are closely related to environmental issues (deforestation, land-use change, and air pollution) and social conflict. The certification program is an effort for the palm oil industry to implement sustainable development. The certified palm oil industry will increase industrial profitability in the long run to increase investor interest in the future. The decision to choose palm oil industry stocks that carry out sustainable practices and generate maximum returns is an exciting issue, but how investors can choose the right stocks and the minimum risk level. This study aims to apply the decision-making model to choose the optimal stock in the palm oil industry, which involves sustainable certification and risk criteria. The method used in this study was the Preference Ranking Organization Method for Enrichment Evaluation (PROMETHEE) based on the Indonesia Stock Exchange (IDX) data. Determinants of stock selection decisions from previous research are considered criteria for decision making. Through the PROMETHEE method, a list of the rankings of the oil palm industry shares can be generated. The sustainable certification and risk criteria can be used as a reference for relevant stakeholders such as investors. Further studies need to be developed by adding non-financial criteria in the firm and developing the criteria to differentiate each other.

What is an AAS?

This paper presents the design of an artificial autonomous system (called AAS) for the stock market domain that considers an approximation from the Big Five model, which proposes that the personality of an individual belongs to one of five different personality profiles: openness, conscientiousness, extraversion, agreeableness, and neuroticism. Several studies have explored investment and financial issues while considering the Big Five model, usually by analyzing data obtained from surveys applied to real people. However, to the best of our knowledge, there are no proposals that suggest the design of an AAS for supporting investment decisions that use the Big Five model as the central approach. The main objective of this proposal is to design an AAS for making investment decisions, where the decisions are adjusted to market conditions through the use of a policy function that adapts over time. This policy function adjusts the consumption level and investment portfolio composition required by the investment profile, considering both the market conditions and the Big Five model profile associated with the AAS. The effectiveness of the investment process is measured by observing the variations in the accumulated wealth and utility. The utility is measured through an abstract representation of the well-being or satisfaction of the investor (i.e., the AAS). AAS—Extraversion obtained the highest accumulated wealth, while AAS—Agreeableness obtained the highest level of utility, showing that the accumulated wealth is only one factor influencing the investor’s well-being.

How long should I hold the PSI 20 index?

The advocates of the efficient market hypothesis recommend buying the market index for the long run, the implication for the Portuguese investors are to buy the PSI-20 index and hold it for at least 15 years. In this paper, we compare two other strategies for PSI-20 over the period 1999 to 2020. The first strategy is based on moving average trading rules and the second strategy, Gold Momentum Strategy (GMS), is based on switching between gold and PSI-20 based on semi-annual performance. Our findings suggest that the moving average trading rules beat the buy and hold strategy by more than 10% per year over the entire period and each sub-period considering both risk and transaction costs. For the second strategy, GMS which is based on comparing the performance of the PSI-20 and the gold index on semi-annual basis and go with the best of two for the next 6 months, we find similar results as the moving average trading rules.

What is financial decision support?

Financial decision supporting is a very important and complex problem. The aim of this paper is to develop the Supervised Learning method based on the random forest algorithm for decision support on stock exchange. Contemporarily, machine learning methods, including decision trees, are often used. Many research works and practical implementation projects focus on supporting decisions on stock markets. However, most of them are related to developed markets in the USA or Western Europe, or Asian stock markets. There is a lack of research related, for example, to the Warsaw Stock Exchange (WSE). The findings concern determining which of the most popular technical analysis indicators have the greatest predictive power for a successful transaction with the feature importance method.

Why is the stock market stochastic?

There are typically two sorts of risks in regard with the security exchange which are systematic risk and unsystematic risks and this is the reason why stock market is stochastic in nature. From years, scholars are trying to find a definitive solution for better decision making in market to generate more returns and reduce risk. There are many ratios, formulas and theorems which attempts to predict the stock market but in reality these theorems are made on countless assumptions. With the new age technology and fast computing, we can now solve this problem by advanced algorithms and machine learning. We will take help of probability to solve problems generating because of stochastic nature of Stock market. Computing series of probability at different scenarios and parameters of stock market by using machine learning.

Is there a study on gold bullion?

Although investors’ behaviour in gold investments has been widely researched, no study to date has investigated it in the gold bullion coin market, despite the fact that the latter is dominated by retail investors, who are traditionally prone to noise trading. We present seminal empirical evidence on this issue by examining feedback trading in the Krugerrand’s secondary market on the Johannesburg Stock Exchange for the March 1996 – August 2019 period. We also assess whether feedback trading interacts with variables relevant to the coin’s valuation and the impact of the global financial crisis over those interactions. Positive feedback trading is present for the full sample period, before and during the crisis, interacting significantly with a variety of factors related to Krugerrand’s pricing, yet dissipates post crisis, likely due to enhanced foreign demand that catapulted the coin’s value, rendering it less easy to trade for South African retail investors. The above imply that Krugerrand-investors should be focusing less on historical price trends and devote more attention to the coin’s global demand instead.

Is the stock market linear or non linear?

It is generally accepted that stock market is viewed as a multifaceted non-linear dynamic system, in which it is normally affected by numerous aspects. Previously, it had been stated that traditional analysis and forecasting methods are not performing well to accurately expose the intrinsic pattern for stock market. Consequently, big differences between expected and observed results. Nevertheless, recently many researchers have implemented several machine learning approaches to forecast the future stock market prices more accurately and precisely

What is technical analysis?

Technical analysis can be understood as a set of rules or charting that tends to anticipate future price shifts based on the study of certain information , such as, for example, purchase price, selling price, and volume traded, among others ( Gorgulho et al., 2011, p. 14073; Lin, Yang, & Song, 2011, p. 11348; Oliveira, Nobre, & Zárate, 2013, p. 7597). Some of this information encompasses a series of historical market data that are widely used by practitioners to identify buy and sell signals ( Omrane & Van Oppens, 2006, p. 949).

How many papers are in the artificial market subcategory?

The application category was divided into three subcategories. The in-the-market subcategory was reflected in 80 papers, whereas 9 papers fell into the artificial market subcategory, and the not applicable subcategory applied to 1 paper. Since most of the studies focus on the in-the-market subcategory, which represents more appropriate environments to test technical analysis, we do not identify gaps within this item.

What is a comparison with the returns of the buy and hold strategy?

Comparison with the returns of the buy-and-hold strategy: In another approach to presenting results, the performance of trading rules is compared to a benchmark usually given in the buy-and-hold portfolio strategy. However, some papers just compare profitability without taking into account the portfolio’s level of risk (e.g., [Dymova et al., 2012], [Teixeira et al., 2010] ).

How many papers have studied stock markets in advanced countries?

After all 85 articles were classified, it was verified that 53 papers had studied stock markets in advanced countries. Another 23 studied developing economies, and 11 were classified as not applicable. Keeping this in mind, it was possible to identify that even though there is a growing number of studies on emerging countries, their numbers cannot be compared with the studies on advanced countries, which can in its turn be considered a gap ( G1 ), as shown below, in the technical analysis literature.#N#G1#N#Why are there so few studies of technical analysis that focus on developing economies or emerging countries such as the BRICS 1? Since there may be important market frictions in emerging markets and some data may have just recently become available, this technical analysis could be explored further. In addition, less mature markets may be less efficient in the weak form when compared to longer standing markets.

Why are transaction costs important?

Transaction costs are an important matter for technical analysts because they alter the results when they are added ( Chang et al., 2004, p. 313; Kwon & Moon, 2007, p. 852; Ülkü & Prodan, 2013, p. 215). Many studies perform two types of analysis: considering and not considering transaction costs. Taking this into account, the observed studies could be classified as follows: (a) The authors considered or (b) did not consider transaction costs in their analyses.

How many articles are there on technical analysis?

To fulfil this goal, we classified and systematized over 85 articles on technical analysis and other trading techniques. We then selected papers published from 1959 to 2014 that specifically studied and tested any type of trend forecasting or technical analysis system or that combined two or more of them, which was the case in many of the considered studies. The widespread use of technical analysis by practitioners and the high number of scientific papers dealing with the theme, as showed in our literature review, are strong evidence of relevance for both the market and the academia. In more detailed terms, we also give a brief descriptive background and summary of each paper’s contributions (available on the Internet Appendix). It is worth noting that, although artificial markets are not the subject of this study, some papers on this topic were included in the analysis, as they contained the keywords used in our search of the Scopus database. Readers interested in this theme may see references to, for example, Ehrentreich (2008), Schredelseker and Hauser (2008), Zenobia, Weber, and Daim (2009) and Mizuta (2016).

What is fundamental analysis?

Fundamental analysis utilizes economic factors to estimate the intrinsic values of securities, whereas technical analysis relies on historical data on stock prices ( Chavarnakul & Enke, 2009, p. 3517; Teixeira & Oliveira, 2010, p. 6885). In general, fundamental analysis has as its cornerstone the essence of Graham’s work, as shown in his famous book Intelligent Investor, which in turn recommends buying stocks based on a set of stock-selection rules. A number of authors, such as Oppenheimer and Schlarbaum (1981, p. 357) and Metghalchi, Chang, and Marcucci (2008, p. 489) tested these rules and applied them and concluded that it is possible to achieve returns higher than those obtained by the buy-and-hold strategy, considering even the semi-strong form of the efficient markets hypothesis.

What is VOC trading?

VOC’s freely transferable securities for trading. The process of buying and s elling stocks

What did the Dutch do at the same time?

the same time, th e Dut ch continuously engaged in pioneering financial innovations. They

What is the name of the facility for engaging in buying and selling of shares of. stock or bonds or other financial instruments?

Stock markets are also known by different names as share. markets and equity markets. A stock exchange, also called a securities exchange or. bourse is the name given to the facility for engaging in buying and selling of shares of. stock or bonds or other financial instruments.

How does the stock market affect the economy?

This is because the impact of stock markets on the economy depends on various factors like the organization of stock exchanges, its relationship with other components of the financial system, the system of governance in the country etc. All of these factors are distinct for each country; therefore, the impact of stock markets on a country’s economy is also distinct. Over the years, the Indian capital market system has undergone major fundamental institutional changes which resulted in reduction in transaction costs, significant improvements in efficiency, transparency and safety. All these changes have brought about the economic development of the economy through stock markets. In the same way, economic expansion fuelled by technological changes, products and services innovation is expected to create a high demand for stock market development. The present paper is divided into two parts: in the first section, the evolution of international stock markets and the developments in Indian stock markets are briefly reviewed to help us understand how stock markets have emerged as the driving economic forces that they are today; and the second part presents a number of studies that review the impact of financial development, stock market development and its functions and its possible impact on economic growth.

What are the three things that have br ought about the economic system?

efficiency, transparency and safety. All these changes have br ought about the economic

When was the first VOC founded?

and stocks. The Dutch East India c ompany (VOC) founded in the y ear 1602 was the first

When did India issue bonds?

India Company in t he early 1600s issued bonds and stocks to th e public. This decision

What does ROE mean in investment?

This ratio offers an overview of how well the shareholder’s funds were used and the gain made out of its investment. When ROE is low, it implies that the shareholder’s funds were not used properly. The formula computes ROE:

What is fundamental analysis?

The fundamental analysis uses the economic standing of the firm, employees, the board of directors, financial status, firm’s yearly report, balance-sheets, income-reports, terrestrial and climatic circumstances like unnatural or natural disasters and political data to predict future stock price (Tsai and Hsiao 2010; Anbalagan and Maheswari 2014; Ghaznavi et al. 2016; Agarwal et al. 2017 ). Due to the unstructured nature of fundamental factors, automation of fundamental analysis is difficult. On the other hand, the emergence of machine learning has enabled researchers to automate stock market prediction based on unstructured data, which in some cases has reported higher prediction accuracy. Nonetheless, fundamental analysis is useful for long-term stock-price movement, but not suitable for short-term stock-price change (Khan et al. 2011 ).

What is OBV indicator?

The OBV indicator is also a momentum indicator that employs volume-flow to predict movements in stock price. An indication of a fall in stock price is a falling OBV line, whiles a future rising in stock price is indicated by growing OBV line.

How to determine EPS?

EPS provides the profitability indication of a firm, and can be determined by dividing the firm’s net income with its whole number of remaining stocks. EPS can be computed in two ways, as illustrated in Eqs. ( 9) and ( 10 ).

What is a well-organised review of pertinent literature with an emphasis on the different factors, which affects the?

1. A well-organised review of pertinent literature with an emphasis on the different factors, which affects the movement of stock prices. 2. Acknowledgement of the distinguishing factors among existing works in the literature and the comparative analysis of the methods used in the predictive models. 3.

Why is the dataset preprocessed?

The obtained dataset is preprocessed to remove noise, data inconsistency, and finally, feature selection data transformation and normalisation for better performance and accuracy (Uysal and Gunal 2014 ).

How do technical analysts predict the stock market?

The technical analyst tries to predict the stock market through the learning of charts that portray the historical market-prices and technical indicators (Sureshkumar and Elango 2011; Wei et al. 2011; Suthar et al. 2012; de Oliveira et al. 2013; Ballings et al. 2015; Gaius 2015; Su and Cheng 2016 ). As shown in Fig. 2, the historical stock prices are preprocessed, and appropriate indicators are calculated and fed into the predictive model. Some of the technical indicators used in technical analysis discussed in Anbalagan and Maheswari ( 2014 ), Bisoi and Dash ( 2014) and Rajashree et al. ( 2014) are simple-moving average (SMA), exponential moving average (EMA), moving average convergence/divergence rules (MACD), relative-strength index (RSI) and on-balance-volume (OBV) as shown in Fig. 3.

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