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Value Premium and Technical Analysis: Evidence from the China Stock Market

Department of Finance and Business Economics, Faculty of Business Administration, University of Macau, Macau 999078, China
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Economies 2019, 7(3), 92; https://doi.org/10.3390/economies7030092
Received: 15 December 2018 / Revised: 4 September 2019 / Accepted: 4 September 2019 / Published: 9 September 2019
(This article belongs to the Special Issue Efficiency and Anomalies in Stock Markets)
We find value premium in the Chinese stock market using a conventional buy-and-hold approach which longs the portfolio with the highest BM ratio and shorts the one with the lowest BM ratio. Based on the finding, we test a new strategy by combining the value premium effect and technical analysis. During the sample period (1995 to 2015), we trade the objective portfolio or risk-free asset according to the moving average timing signals, and we find excess return from such a zero-cost trading strategy. We perform various robustness tests and find that the excess returns remain significantly positive after adjusting for risks (on three factor models) and transaction costs. In general, we find that the combined trading strategy can generate significant positive risk-adjusted returns after the transaction costs. View Full-Text
Keywords: value premium; technical analysis; moving average; China stock market value premium; technical analysis; moving average; China stock market
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Lam, K.S.K.; Dong, L.; Yu, B. Value Premium and Technical Analysis: Evidence from the China Stock Market. Economies 2019, 7, 92.

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