TECHNICAL ANALYSIS: CONCEPT OR REALITY?

Muhammad Asad Khan, Qaiser Aman, Noman Khan


DOI: http://dx.doi.org/10.22555/pbr.v18i3.941

Abstract


The paper investigates the validity of technical analysis tools
for sample period of 1997 to 2014 on Karachi Stock Exchange for the following three aspects; first KSE-100 index do not follow random walk model by applying the Wright‘s rank based variance ratio test; secondly a variety of extremely popular technical trading rules based on simple moving averages, exponential moving averages, relative strength index (RSI) and stochastic RSI (RSISt) to find the predictive ability of these indicators.  These trading rules have predictive power over future price behavior. It is also evidenced that the inclusion of oscillators like RSI and RSISt increase the performance in generating abnormal return. Based on these trading rules, the study proposed two trading strategic to know that whether investor beat buy-andhold
strategy. The results indicate that strategy based on these rules
have the ability to outperform the buy-and-hold strategy, even after considering the transactional cost.

Full Text:

PDF

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.