Ownership Restriction, Information Diffusion Speed, and the Performance of Technical Trading Rules in Chinese Domestic and Foreign Shares Markets

We examine the performance of technical trading rules in Chinese domestic A-share and foreign B-share markets. After controlling for non-synchronous trading and transaction costs, we find evidence to support the predictability and profitability of some of the most popular technical trading rules for...

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Bibliographic Details
Published in:Review of Pacific basin financial markets and policies 2007-12, Vol.10 (4), p.525
Main Authors: Li, Wei, Wang, Steven Shuye
Format: Article
Language:English
Subjects:
Financial performance
Mathematical models
Rates of return
Securities markets
Studies
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Summary:We examine the performance of technical trading rules in Chinese domestic A-share and foreign B-share markets. After controlling for non-synchronous trading and transaction costs, we find evidence to support the predictability and profitability of some of the most popular technical trading rules for B-shares but not for A-shares. However, after February 19, 2001, when domestic investors were allowed to trade B-shares, the predictive power of the trading rules in B-share markets disappeared. We conjecture that the predictability of technical trading rules in B-share markets can be attributed to the gradual diffusion of information among foreign investors under the foreign share ownership restriction, and, partly, to positive autocorrelations induced by thin trading. [PUBLICATION ABSTRACT]
ISSN:0219-0915
1793-6705