Profitability of technical trading strategies in emerging Sri Lankan stock market
Abstract
This study examines whether the technical trading strategies can outperform the unconditional buy-and-hold strategy to forecast stock price movements and earn excess returns, after adjusting transaction costs, in emerging Colombo Stock Exchange (CSE). The study uses daily market closing prices of All Share Price Index (ASPI), which is a composite index to represent whole market, for twenty five years from January 1985 to December 2010. The variable length moving average method and fixed length moving average method with sixteen different rules is used as the methodology to analyze data. The empirical findings of the study confirmed that the moving average trading strategies have statistically significant predictive ability in explaining the market and capable of generating excess return to investors. However after considering transaction costs the excess return is negligible.
DOI: http://dx.doi.org/10.4038/kjm.v2i2.6549
Kelaniya Journal of Management Vol.2(2) 2013:32-50
© 2014 PND Fernando, published by Faculty of Commerce and Management Studies University of Kelaniya
This work is licensed under the Creative Commons License.