Market efficiency and technical analysis during different market phases: further evidence from Malaysia

  • Received June 12, 2017;
    Accepted July 12, 2017;
    Published August 21, 2017
  • Author(s)
  • DOI
  • Article Info
    Volume 14 2017, Issue #2 (cont. 2), pp. 359-366
  • Cited by
    4 articles

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

The profitability of simple technical trading rules remains an interesting topic and has been thoroughly explored in the literature. In this paper, the authors investigate the profitability of two popular moving average (MA) rules in the Bursa Malaysia before, during and after the global financial crisis (GFC) of 2008-2009. Using variable length MA (VMA) and fixed length MA (FMA) technical rules, the authors explore if there were differences in their performance during the different market phases, and if swing traders can gain by trading on the basis of these strategies. When practical trading constraints are considered, the authors find that MA rules performed differently during the three market phases. Over time, the forecasting powers of these rules have diluted and they have performed poorly in the most recent subsample. The findings suggest that the Malaysian stock market is gradually becoming more efficient. This outcome can be attributed to the technological advancements and widespread use of exchange traded funds.

view full abstract hide full abstract
    • Table 1. VMA and FMA trading performance before the global financial crisis (2005–2007)
    • Table 2. VMA and FMA trading performance during the global financial crisis (2008–2009)
    • Table 3. VMA and FMA trading performance after the global financial crisis (2010–2013)