Cross Country Differences in the Profitability from Technical Analysis Strategies

90 Pages Posted: 3 Nov 2014 Last revised: 25 May 2019

See all articles by Jiali Fang

Jiali Fang

Massey University - School of Economics and Finance

Ben Jacobsen

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

Date Written: May 24, 2019

Abstract

In theory, technical analysis may work because of three reasons: 1) herding behavior, 2) prices being partially revealing and 3) sentiment. Our empirical cross-country evidence from 50 countries shows that technical analysis indeed works particularly well in countries that score highly on different proxies for herding and information uncertainty. As a crude indication, our combined set of proxies explain almost 40% of the variation in cross country profits from technical analysis strategies. Our result may explain why studies using data from different countries find mixed results on the profitability of technical analysis.

Keywords: technical analysis; market efficiency; return predictability; behavior bias

JEL Classification: G10, G12, G14

Suggested Citation

Fang, Jiali and Jacobsen, Ben, Cross Country Differences in the Profitability from Technical Analysis Strategies (May 24, 2019). Available at SSRN: https://ssrn.com/abstract=2518240 or http://dx.doi.org/10.2139/ssrn.2518240

Jiali Fang (Contact Author)

Massey University - School of Economics and Finance ( email )

Private Bag 102904, North Shore
Auckland, 0745
New Zealand

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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