Market efficiency, nonlinearity and technical analysis in the global market

• Autor(a) principal: Ly, Amadú
• Data de Publicação: 2007
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/629
• topic: Índice bolsista; Eficiência de mercado; Métodos não lineares; Teste BDS; Análise técnica; Bootstrap; World market indices; Technical analysis; Market Efficiency; Nonlinearity; BDS test

In this thesis we investigate market efficiency from a different perspective. Instead of traditional approach to one market in specific, this time around we study market efficiency from a global perspective. See the global market indices as one single market. We used both nonlinear methods and technical analysis in order to accomplish our purpose. We used BDS to test for nonlinearity in the return series, as expected the results conformed with the general view, which is market returns exhibit nonlinear dependence. We trace the cause of the dependence as a result of the ARCH type process. We also used technical trading strategy to test whether profit can be made through trading in stock indices around the world. We investigate the simple moving averages, weighted moving averages and exponential moving averages with different allocation of resources, we found all techniques to be profitable when 1% and 2% commission are considered. For the 50 day simple moving average, the average daily return is 0,0009%, compared with the - 0,669% of the buy and hold strategy. These results were also confirmed using bootstrap methodology in which we considered the random walk model as return generating process. These rules are profitable after accounting for commission fees.