On the existence of visual technical patterns in the UK stock market

Dawson, Edward R. and Steeley, James M. (2003). On the existence of visual technical patterns in the UK stock market. Journal of Business Fnance and Accounting, 30 (1/2), pp. 263-293.

Abstract

The aim in this paper is to replicate and extend the analysis of visual technical patterns by Lo et al. (2000) using data on the UK market. A non-parametric smoother is used to model a nonlinear trend in stock price series. Technical patterns, such as the 'head-and-shoulders' pattern, that are characterised by a sequence of turning points are identified in the smoothed data. Statistical tests are used to determine whether returns conditioned on the technical patterns are different from random returns and, in an extension to the analysis of Lo et al. (2000), whether they can outperform a market benchmark return. For the stocks in the FTSE 100 and FTSE 250 indices over the period 1986 to 2001, we find that technical patterns occur with different frequencies to each other and in different relativities to the frequencies found in the US market. Our extended statistical testing indicates that UK stock returns are less influenced by technical patterns than was the case for US stock returns.

Publication DOI: https://doi.org/10.1111/1468-5957.00492
Divisions: Aston Business School > Accounting
Aston Business School > Accounting Research Group
Additional Information: The definitive version is available at www.blackwell-synergy.com
Uncontrolled Keywords: technical trading rules,non-parametric smoother,market efficiency,Business, Management and Accounting (miscellaneous),Accounting,Finance
Full Text Link: http://www3.int ... 840042/abstract
Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
Published Date: 2003-01
Authors: Dawson, Edward R.
Steeley, James M. ( 0000-0003-0345-5089)

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