Is Technical Analysis Profitable on U.S. Stocks With Certain Size, Liquidity or Industry Characteristics?

25 Pages Posted: 15 Sep 2006 Last revised: 13 Nov 2007

Ben R. Marshall

Massey University - School of Economics and Finance

Qian Sun

Fudan University

Martin R. Young

Massey University - School of Economics and Finance

Date Written: September 2007

Abstract

We consider whether popular technical trading rules are profitable on a subset of U.S. stocks with certain size, liquidity, and industry characteristics. We find these rules are rarely profitable during the 1990 to 2004 period, however there is some evidence they are more profitable for smaller, less liquid stocks. When a rule does produce statistically significant profits on a stock they tend to be considerably higher than reasonable estimates of transactions costs. This may explain why these rules are so popular in spite of their overall underperformance.

Keywords: Technical Analysis, Size, Liquidity

JEL Classification: G14

Suggested Citation

Marshall, Ben R. and Sun, Qian and Young, Martin R., Is Technical Analysis Profitable on U.S. Stocks With Certain Size, Liquidity or Industry Characteristics? (September 2007). Available at SSRN: https://ssrn.com/abstract=929954 or http://dx.doi.org/10.2139/ssrn.929954

Ben R. Marshall (Contact Author)

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand
64 6 350 5799 (Phone)
64 6 350 5651 (Fax)

Qian Sun

Fudan University ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China
86 21 25011094 (Phone)

Martin R. Young

Massey University - School of Economics and Finance ( email )

Private Bag 11222
Palmerston North, 4442
New Zealand

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