Technical Indicators and Cross-Sectional Expected Returns

33 Pages Posted: 27 Dec 2021

See all articles by Hui Zeng

Hui Zeng

Massey University - Department of Economics and Finance

Ben R. Marshall

Massey University - School of Economics and Finance

Nhut H. Nguyen

Auckland University of Technology

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Date Written: December 20, 2021

Abstract

This study shows that 14 widely documented technical indicators explain cross-sectional stock
expected returns. The technical indicators have lower estimation errors than the three factor
Fama-French model and the historical mean. The long-short portfolios based on the crosssectional estimated returns generate substantial profits consistently across the entire period.
The well-known cross-sectional expected return determinants, including momentum, size,
book-to-market, investment, and profitability, do not explain the explanatory power of the
technical indicators. Our findings suggest that the technical indicators play an important role
in determining the variation in cross-sectional expected returns in addition to the five-factor
model.

Keywords: Cross-sectional stock returns, technical indicators, three factor Fama-French model, cross-sectional expected return determinants

JEL Classification: C13, C31, G12

Suggested Citation

Zeng, Hui and Marshall, Ben R. and Nguyen, Nhut H. and Visaltanachoti, Nuttawat, Technical Indicators and Cross-Sectional Expected Returns (December 20, 2021). Available at SSRN: https://ssrn.com/abstract=3992035 or http://dx.doi.org/10.2139/ssrn.3992035

Hui Zeng (Contact Author)

Massey University - Department of Economics and Finance ( email )

Private Bag 102904
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Ben R. Marshall

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
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New Zealand
64 6 350 5799 (Phone)
64 6 350 5651 (Fax)

Nhut H. Nguyen

Auckland University of Technology ( email )

55 Wellesley St East
Auckland, Auckland 1010
New Zealand
+64 9 921 9999 (Phone)

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance ( email )

School of Economics and Finance
Private Bag 102904, NSMC
Auckland
New Zealand
64 9 414 0800 (43169) (Phone)
64 9 441 8177 (Fax)

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