Technical Market Indicators: An Overview

64 Pages Posted: 14 Jun 2014 Last revised: 23 Oct 2014

See all articles by Jiali Fang

Jiali Fang

Massey University - School of Economics and Finance

Yafeng Qin

Massey University

Ben Jacobsen

Tilburg University - TIAS School for Business and Society; Massey University

Date Written: June 12, 2014

Abstract

Current evidence on the predictability of technical analysis largely concentrates on price-based technical indicators such as moving averages rules and trading range breakout rules. In contrast, the predictability of widely used technical market indicators such as advance/decline lines, volatility indices, and short-term trading indices has drawn limited attention. Although some market indicators have also become popular sentiment proxies in the behavioral finance field to predict returns, the results generally rely on using just one or a few indicators at a time. This approach raises the risk of data snooping, since so many proxies are proposed. We review and examine the profitability of a wide range of 93 market indicators. We give these technical market indicators the benefit of the doubt, but even then we find little evidence that they predict stock market returns. This conclusion continuously holds even if we allow predictability to be state dependent on business cycles or sentiment regimes.

Keywords: Technical Analysis, Market Indicators, Sentiment Indicators, Asset Pricing

JEL Classification: G10, G12

Suggested Citation

Fang, Jiali and Qin, Yafeng and Jacobsen, Ben, Technical Market Indicators: An Overview (June 12, 2014). Available at SSRN: https://ssrn.com/abstract=2449344 or http://dx.doi.org/10.2139/ssrn.2449344

Jiali Fang (Contact Author)

Massey University - School of Economics and Finance ( email )

Private Bag 102904, North Shore
Auckland, 0745
New Zealand

Yafeng Qin

Massey University ( email )

Private Bag 11 222
Palmerston North, Manawatu 4442
New Zealand
+64 9 4140800 ext 43178 (Phone)
+64 9 441 8177 (Fax)

Ben Jacobsen

Tilburg University - TIAS School for Business and Society ( email )

Warandelaan 2
TIAS Building
Tilburg, Noord Brabant 5037 AB
Netherlands

Massey University ( email )

Auckland
New Zealand

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