An Alternative Investigation of Weak Form Efficiency in Dhaka Stock Exchange Based on Technical Analysis

Global Journal of Management and Business Research (C), Volume XIV, Issue VI, 2014

8 Pages Posted: 14 Mar 2015

See all articles by Md Khan

Md Khan

The University of Newcastle

Umma Huq

University of Dhaka - Department of Finance

Date Written: December 17, 2014

Abstract

One highly documented method to test a capital market for weak form efficiency is to identify the return predictability of technical trading rules in that market. Studies on these tests are fewer in number in emerging markets than that of in developed markets and most of the tests have drawn conclusion by including only trend indicators in their trading rules. But it has already been recognized in some previous developed markets studies that trend indicators generally fail to identify sufficient information content in the past prices; hence practitioners very often use these trend indicators combined with confirming indicator (Loh 2007). The current study has investigated Dhaka Stock Exchange, an emerging market of South Asia, for weak form market efficiency by approaching the tests of technical trading rules and has confirmed the profitability of these rules up to 2.15 percent costs per transaction. Here it has used stochastic oscillator as a confirming indicator combined with moving averages (trend indicators) which is the first study of its kind in this market, and has found that it can improve the return predictability only for the short length moving averages.

Keywords: Dhaka stock exchange, tests of technical trading rules, market efficiency, moving averages combined with stochastic oscillator

JEL Classification: G14

Suggested Citation

Khan, Md and Huq, Umma, An Alternative Investigation of Weak Form Efficiency in Dhaka Stock Exchange Based on Technical Analysis (December 17, 2014). Global Journal of Management and Business Research (C), Volume XIV, Issue VI, 2014, Available at SSRN: https://ssrn.com/abstract=2577485

Md Khan (Contact Author)

The University of Newcastle ( email )

University Drive
Callaghan, NSW 2308
Australia

Umma Huq

University of Dhaka - Department of Finance ( email )

Department of Finance
University of Dhaka
Dhaka, 1000
Bangladesh

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