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Is technical analysis informative in UK stock market? Evidence from decomposition-based vector autoregressive (DVAR) model

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Abstract

The paper proposes a new approach — The decomposition-based vector autoregressive (DVAR) model to scrutinize the predictability of the UK stock market. Empirical studies performed on the monthly British FTSE100 index over 1984–2012 confirm that the DVAR model does provide informative forecasts for both in-sample and out-of-sample forecasts. Trading strategies based on the DVAR forecasts can significantly beat the simple buy-and-hold, which demonstrates the valuable information provided by technical analysis in the UK stock market.

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Author information

Authors and Affiliations

  1. Research Center of Applied Finance, University of International Business and Economics, Beijing, 100029, China

    Haibin Xie

  2. School of Banking and Finance, University of International Business and Economics, Beijing, 100029, China

    Jiangze Bian

  3. School of International Trade and Economics, University of International Business and Economics, Beijing, 100029, China

    Mingxi Wang

  4. School of Management, China University of Mining and Technology, Beijing, 100083, China

    Han Qiao

Authors
  1. Haibin Xie
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  2. Jiangze Bian
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  3. Mingxi Wang
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  4. Han Qiao
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Additional information

This research is supported by Social Science Foundation of Ministry of Education of China under Grant No. 12YJC790001, National Social Science Foundation of China under Grant No. 12CJY117, the National Natural Science Foundation of China under Grant Nos. 71003057 and 71373262, and the Program for Innovative Research Team and “211” Program in UIBE.

This paper was recommended for publication by Editor WANG Shouyang.

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Xie, H., Bian, J., Wang, M. et al. Is technical analysis informative in UK stock market? Evidence from decomposition-based vector autoregressive (DVAR) model. J Syst Sci Complex 27, 144–156 (2014). https://doi.org/10.1007/s11424-014-3280-9

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  • DOI: https://doi.org/10.1007/s11424-014-3280-9

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