Profitability of technical analysis - the case of Malaysian stock market.

Abstract

This paper attempts to investigate the significance of profits arising from the application of popular technical trading rules such as DMACO (Dual Moving Average Crossover), TRB (Trading Range Break) and Stochastic Indicator in general stock market indices, particularly KLCI (Kuala Lumpur Composite Index) throughout the sampling period. In the context of Economics, it is in equivalence to testing the validity of Efficient Market Hypothesis and Random Walk Theory. The results show that moving averages rules and trading range breakout rules are effective strategies particularly on the long side. As profitable strategies can be found, Weak-form Efficient Market Hypothesis is violated.