Data snooping on technical analysis: Evidence from the Taiwan stock market
Journal
Review of Pacific Basin Financial Markets and Policies
Journal Volume
14
Journal Issue
2
Pages
195-212
Date Issued
2011
Author(s)
Abstract
The main purpose of this paper is to investigate the validity and predictability of technical analysis in the Taiwan stock market. Bootstrapped tests of White (2000) and of Hansen (2005) are employed to ascertain whether there exists a superior trading rule among two broadly used sets of technical analysis. One coming from Brock et al. (1992) and the other from Sullivan et al. (1999). Moreover, this study brings together powerful bootstrapped tests along with two institutional adjustments to ascertain the efficacy of technical analysis: (1) non-synchronous trading and (2) transaction costs. The empirical results indicate that this triad-data snooping, non-synchronous trading and transaction costs, has a great impact on the performance of technical analysis. In fact, the Taiwan stock market stands for market efficiency, and economical profits cannot be rendered from technical analysis in this market. © 2011 World Scientific Publishing Co. and Center for Pacific Basin Business, Economics and Finance Research.
SDGs
Type
journal article