國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
Consumer Services, Price and Volume Strategy can even have hit ratios over 0.5 when using specific MA rules with buy actions. As for the other two strategies, Price Strat-egy and PV StratStrat-egy have similar results and most of the average returns and hit ratios of Price Strategy are a little higher than those of PV Strategy except Consumer Ser-vices. We can say that both of these two strategies can catch extreme price movements to earn large profits for one trading time. Overall using volume as weight of price to make MA rules does not have significant better performance than using only price to make MA rules.
We can also find that for average returns, buy actions have trends when using longer days of MA rules while there are specific MA rules outperform when taking sell actions. No matter for buying or selling, average holding days have uptrends with longer days of MA rules, and buy signals keep longer days within one trading. As for hit ratios, most of the results of buy actions present no difference between MA rules within a strategy, however, sell actions have lower hit ratios when using longer days of MA rules.
5. Conclusions
This article examines the profitability of technical analysis for FTSE TWSE Mid-Cap Taiwan 100 Index constituents under the hypothesis of no transaction costs.
It is accomplished through the use of three strategies and fifteen moving average rules that only buy (sell) the securities when short-term MA breaks long-term MA from be-low (above).
To realize the profitability of these MA rules, I show the average returns per trad-ing times and hit ratios of buy and sell signals for all constituents. I present the phe-nomenon of using price and weighted price as factors to make MA rules which are Price and PV strategies to their ability to catch extreme price movements to have
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
more returns for one trading times. On the contrary, Price and Volume Strategy is a more conservative strategy which considers both price and volume MA rules to make a trading decision, and it has more percentage of earning positive returns even though it cannot have higher average returns per trading times. No matter what the strategy is, buy signals consistently generate higher average returns than sell signals.
I also illustrate these outcomes for individual industry classifications. The results have no big differences but more up-and-down with those of all constituents without considering industries. PV Strategy performs better in specific industry like Consumer Services, however, it has worse outcome than other two strategies. Apparently, taking volumes as weights of prices has no better performance than only using prices. This result shows what it believes prices with higher volumes have more meaning may be wrong. As for Price and Volume Strategy, it is still the one with the lowest average returns and more percentage of positive returns, and some industries like Basic Mate-rials and Consumer Services can get higher than 50% of positive returns which is bet-ter than that of without classifying industries.
Although Price and Volume Strategy can earn more times of positive returns, it has more transactions for every industry. Once taking transaction costs into considera-tion, the positive returns of this strategy may be eroded. Readers can compare the av-erage returns per trading times with the transaction costs of Taiwan stock market to see the possible outcome when considering transaction costs.
Overall the outcomes are not good. It can say that technical analysis like moving average cannot have good performances on these stocks.
Finally directions for future study, it could be the examination of these results with considering transaction costs. Although I present some phenomenon when using these tools, this paper is lack of examining the predictability of moving average on these stocks. Besides, what I use to make moving average rules are closing prices. It
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
should use the opening prices of the next day to avoid some price impact. Future studies can also use other technical analysis to examine the profitability on these stocks.
References
Fama E. F., 1970, “Efficient capital markets: A review of the theory and empirical work”, Journal of Finance 25, 383-416
Bodie, Z., A. Kane, et al., 2005, “Investments”, sixth ed., 373-374.
Park, C. H. and S. H. Irwin, 2004, “The Profitability of Technical Analysis: A Review”
Brock W., Lakonishock J. and LeBaron B., 1992, “Simple technical trading rules and the stochastic properties of stock returns”, Journal of Finance 47, 1731-1764.
Bessembinder H., Chan K., 1995, “The profitability of technical trading rules in the Asian stock markets”, Pacific-Basin Finance Journal 3, 257-284.
Mitchell R. and Ricardo P.C. Leal, 1999, “Tests of technical trading strategies in the emerging equity markets of Latin America and Asia”, Journal of Banking & Finance 23, 1887-1905.
Blume L., Easley D. and O'Hara M., 1994, “Market statistics and technical analysis:
The role of volume”, Journal of Finance 49, 153-181.
Ramazan G. and Thanasis S., 1998, “Moving average rules, volume and the
predictability of security returns with feedforward networks”, Journal of Forecasting 17, 401-414.
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
Appendix A：FTSE TWSE Mid-Cap Taiwan 100 Index constituents
Stock
Code Company Name ICB Stock
Code Company Name ICB
1227 Standard Foods Corporation 3577 2511 Prince Housing & Development
Corp. 8633
1304 Usi Corporation 1357 2542 Highwealth Construction Corp. 8633 1314 China Petrochemical
Devel-opment Corporation 1357 2545 Huang Hsiang Construction
Corporation 2357
1319 Tong Yang Industry Co.,Ltd. 3355 2547 Radium Life Tech. Co., Ltd. 8633 1409 Shinkong Synthetic Fiber
Corporation 3763 2548 Huaku Development Co., Ltd. 8633 1434 Formosa Taffeta Co., Ltd. 3763 2603 Evergreen Marine Corp
(Tai-wan) Ltd. 2773
1440 Tainan Spinning Co., Ltd. 3763 2605 Sincere Navigation Corporation 2773 1503 Shihlin Electric &
Engineer-ing Corp. 2733 2606 U-Ming Marine Transpost Corp. 2773 1504 TECO Electric & Machinery
Company 3722 2607 Evergreen International Storage
& Transport 2777
1605 Walsin Lihwa Corporation 2733 2609 Yang Ming Marine Transport
Corp. 2773
1704 LCY Chemical Corp 1357 2610 China Airlines Ltd. 5751 1710 Oriental Union Chemical
Corp., 1353 2615 Wan Hai Lines Ltd. 2773
1717 Eternal Chemical Co Ltd 1357 2707 Formosa International Hotels
Corporation 5753
1723 China Steel Chemical Co., 1357 2723 GOURMET MASTER CO LTD
TWD10 5757
1802 Taiwan Glass Ind. Corp. 2353 2823 China Life Insurance Co., Ltd. 8575 1907 Yuen Foong Yu Paper
Mfg.Co., Ltd. 1737 2833 Taiwan Life Insurance Co., Ltd. 8575 2006 Tung Ho Steel Enterprise
Corp. 1757 2834 Taiwan Business Bank 8355
2014 Chung Hung Steel Co., Ltd. 1757 2854 Polaris Securities Co., Ltd. 8777 2015 Feng Hsin Iron & Steel Co.,
Ltd. 1757 2855 President Securities Corp. 8777
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
2049 Hiwin Technologies Corp 2757 2884 E.Sun Financial Holding
Com-pany, Ltd. 8355
2101 Nankang Rubber Tire Corp.,
Ltd. 3357 2887 Taishin Financial Holding Co.,
Ltd. 8355
2103 TSRC Corporation 1353 2889 Waterland Financial Holdings 8777 2201 Yulon Motor Co., Ltd. 3353 2903 Far Eastern Department Stores
Ltd. 5373
2204 China Motor Corporation 3353 2915 Ruentex Industries Limited 3763 2315 Mitac International Corp. 9572 3008 Largan Precision Co., Ltd. 3745 2323 CMC Magnetics
Corpora-tion 9572 3034 Novatek Microelectronics Corp. 9576 2327 Yageo Corporation 2733 3035 Faraday Technology Corp. 9576 2328 Pan-International Industrial
Corp. 2733 3037 Unimicron Technology Corp. 2733
2337 Macronix International
Company, Ltd. 9576 3044 Tripod Technology Corporation 2733 2344 Winbond Electronics Corp. 9576 3049 HannStar Touch Solution Inc 2737 2349 Ritek Corporation 2737 3189 Kinsus Interconnect Technology
Corp. 9576
2352 Qisda Corporation 9572 3406 Genius Electronic Optical Co.,
Ltd. 2737
2356 Inventec Corporation 9572 3474 Inotera Memories, Inc. 9576
2360 Chroma Ate Inc. 2733 3504 Young Optics Inc. 2733
2362 Clevo Co. 9572 3514 Gintech Energy Corporation 583 2371 Tatung Co. 9572 3622 Young Fast Optoelectronics Co.,
Ltd. 2733
2374 Ability Enterprise Co., Ltd. 9574 3702 Wpg Holdings Limited 9576 2379 Realtek Semiconductor Corp 9576 5522 Farglory Land Development
Co., Ltd. 8633
2384 Wintek Corp. 2737 6005 Capital Securities Corp. 8777 2385 Chicony Electronics Co.,
Ltd. 9572 6116 Hannstar Display Corp 9572
2388 Via Technologies, Inc. 9576 6176 Radiant Opto-Electronics Corp. 2733 2392 Cheng Uei Precision Industry
Co., Ltd. 2737 6239 Powertech Technology Inc. 9576
2393 Everlight Electronics Co.,
Ltd. 2733 6286 Richtek Technology Corp. 9576
2395 Advantech Co., Ltd. 9572 8008 Lite-On It Corporation 9572
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
2408 Nanya Technology
Corpora-tion 9576 8046 Nan Ya Printed Circuit Board
Corporation 2733
2451 Transcend Information, Inc. 9576 9907 Ton Yi Industrial Corp. 1755 2474 Catcher Technology Co., Ltd. 2757 9917 Taiwan Secom Co., Ltd. 2791 2489 Amtran Technology Co.,
Ltd. 3743 9921 Giant Manufacturing Co., Ltd. 3745
2501 Cathay Real Estate
Devel-opment Co., Ltd. 8633 9933 Ctci Corporation 2357
2504 Goldsun Development &
Construction Co., Ltd. 2353 9945 Ruentex Development Co., Ltd. 5373
Source: TWSE (2011.4.29)