Abstract
This paper examines the validity of Technical analysis on Karachi Stock
Exchange by investigating the tools used in Technical analysis for the sample
period of 1997 to 2014. The KSE-100 index was examined to investigate the
efficiency of stock exchange by employing Wright’s sign based variance ratio
test. The results indicate that KSE-100 index is not efficient in its weak form.
The study then compared a broad range of technical trading rules based on
Simple Moving Averages, Exponential Moving Averages, with Generalized
Regression Neural Network (GRNN) to find the forecasting ability of these
indicators individually as well as in combination. The results indicate the
predictive power over future stock price behavior. The insertion of GRNN
enhances the profit generating capacity of above average return. To know that
whether it is possible to beat buy-and-hold strategy, the study proposes two
trading strategies based on these rules. The proposed strategies have the
capability to outstrip the buy-and-hold strategy, even in the presence of
transactional cost. Technical analysis is very effective for the investors in
creating excess return for the sample period
Dr. Muhammad Asad Khan, Dr. Noman Khan, Dr. Jawad Hussain, Naveed Hussain Shah, Qamar Abbas. (2017) Validity of Technical Analysis Indicators: A Case of KSE-100 Index, Abasyn Journal of Social Sciences, Volume-10, Issue-1.
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