title: Performance of technical trading rules: evidence from Southeast Asian stock markets.
abstract: This paper examines the profitability of technical trading rules in the five Southeast Asian stock markets. The data cover a period of 14 years from January 2000 to December 2013. The instruments investigated are five Southeast Asian stock market indices: SET index (Thailand), FTSE Bursa Malaysia KLC index (Malaysia), FTSE Straits Times index (Singapore), JSX Composite index (Indonesia), and PSE composite index (the Philippines). Trading strategies investigated include Relative Strength Index, Stochastic oscillator, Moving Average Convergence-Divergence, Directional Movement Indicator and On Balance Volume. Performances are compared to a simple Buy-and-Hold. Statistical tests are also performed. Our empirical results show a strong performance of technical trading rules in an emerging stock market of Thailand but not in a more mature stock market of Singapore. The technical trading rules also generate statistical significant returns in the Malaysian, Indonesian and the Philippine markets. However, after taking transaction costs into account, most technical trading rules do not generate net returns. This fact suggests different levels of market efficiency among Southeast Asian stock markets. This paper finds three new insights. Firstly, technical indicators does not help much in terms of market timing. Basically, traders cannot expect to buy at a relative low price and sell at a relative high price by just using technical trading rules. Secondly, technical trading rules can be beneficial to individual investors as they help them to counter the behavioral bias called disposition effects which is the tendency to sell winning stocks too soon and holding on to losing stocks too long. Thirdly, even profitable strategies could not reliably predict subsequent market directions. They make money from having a higher average profit from profitable trades than an average loss from unprofitable ones.
authors.affiliation: College of Management (CMMU), Mahidol University, Bangkok, Thailand.
authors.forename: Piyapas
authors.initials: P
authors.lastname: Tharavanij
authors.affiliation: College of Management (CMMU), Mahidol University, Bangkok, Thailand.
authors.forename: Vasan
authors.initials: V
authors.lastname: Siraprapasiri
authors.affiliation: College of Management (CMMU), Mahidol University, Bangkok, Thailand.
authors.forename: Kittichai
authors.initials: K
authors.lastname: Rajchamaha
keywords: Technical analysis; Trading rule; Trading system