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Technical Analysis on the Swedish Stock Market: Evaluating the predictive ability of common technical trading rules

Ifantidis Gharizadeh, Evagelos LU (2024) NEKH02 20232
Department of Economics
Abstract
This paper investigates the predictive ability of technical trading rules (TTRs) on the Swedish stock market. Eight variations of two common TTRs—the relative strength index (RSI) and the moving average convergence/ divergence (MACD)—are applied on the constituent stocks of the OMX Stockholm 30 from January 2014 to December 2023. To evaluate forecasting ability, an event study is conducted. Abnormal returns are aggregated across stocks and across time and are tested for significance using a cross-sectional t-test. Results indicate that cumulative average abnormal returns (CAAR) are significant for some variations of the RSI and the MACD. However, since abnormal returns are inconsistent across trading signals and likely not large enough to... (More)
This paper investigates the predictive ability of technical trading rules (TTRs) on the Swedish stock market. Eight variations of two common TTRs—the relative strength index (RSI) and the moving average convergence/ divergence (MACD)—are applied on the constituent stocks of the OMX Stockholm 30 from January 2014 to December 2023. To evaluate forecasting ability, an event study is conducted. Abnormal returns are aggregated across stocks and across time and are tested for significance using a cross-sectional t-test. Results indicate that cumulative average abnormal returns (CAAR) are significant for some variations of the RSI and the MACD. However, since abnormal returns are inconsistent across trading signals and likely not large enough to offset transaction costs, this study cannot establish that conventional TTRs are appropriate tools to predict the future direction of the Swedish stock market. (Less)
Please use this url to cite or link to this publication:
author
Ifantidis Gharizadeh, Evagelos LU
supervisor
organization
course
NEKH02 20232
year
type
M2 - Bachelor Degree
subject
keywords
technical analysis, technical trading rules, Swedish stock market, event study
language
English
id
9148107
date added to LUP
2024-04-16 09:26:33
date last changed
2024-04-16 09:26:33
@misc{9148107,
  abstract     = {{This paper investigates the predictive ability of technical trading rules (TTRs) on the Swedish stock market. Eight variations of two common TTRs—the relative strength index (RSI) and the moving average convergence/ divergence (MACD)—are applied on the constituent stocks of the OMX Stockholm 30 from January 2014 to December 2023. To evaluate forecasting ability, an event study is conducted. Abnormal returns are aggregated across stocks and across time and are tested for significance using a cross-sectional t-test. Results indicate that cumulative average abnormal returns (CAAR) are significant for some variations of the RSI and the MACD. However, since abnormal returns are inconsistent across trading signals and likely not large enough to offset transaction costs, this study cannot establish that conventional TTRs are appropriate tools to predict the future direction of the Swedish stock market.}},
  author       = {{Ifantidis Gharizadeh, Evagelos}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Technical Analysis on the Swedish Stock Market: Evaluating the predictive ability of common technical trading rules}},
  year         = {{2024}},
}