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Management article
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Reference no. BSJ03-26
Published by: Allied Business Academies
Published in: "Business Studies Journal", 2011
Length: 10 pages

Abstract

We investigate the predictive power of various trading rules with different combination of the popular six indicators in technical analysis for the Danish stock index over the period of July 1st of 1993 to June 30th of 2010. Our empirical results for the Danish stock index show that all the buy-sell differences under trading rules of either two-indicator or three-indicator combinations are positive with significant t-stats to reject the Efficient Market Hypothesis. Technical analysis has been proved to have solid predictive power and can discern recurring price patterns in the case of the Danish stock index in which RSI3 serves as the best indicator in any combination with other indications for trading rule development.

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Abstract

We investigate the predictive power of various trading rules with different combination of the popular six indicators in technical analysis for the Danish stock index over the period of July 1st of 1993 to June 30th of 2010. Our empirical results for the Danish stock index show that all the buy-sell differences under trading rules of either two-indicator or three-indicator combinations are positive with significant t-stats to reject the Efficient Market Hypothesis. Technical analysis has been proved to have solid predictive power and can discern recurring price patterns in the case of the Danish stock index in which RSI3 serves as the best indicator in any combination with other indications for trading rule development.

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