Effectiveness of Technical Analysis Signals Around the Earning Announcements in Malaysian Stock Market

  • Authors

    • Kelvin Lee Yong Ming
    • Mohamad Jais
    2018-08-08
    https://doi.org/10.14419/ijet.v7i3.21.17104
  • Technical Analysis, Simple Moving Average (SMA), Relative Strength Index (RSI), Stochastic (K line), Moving Average Convergence/Divergence (MACD)

  • Abstract

    Technical analysis is an analysis that widely applied by the investor in the stock market. However, various corporate announcements could cause the market to react, and the most significant corporate announcement is the earnings announcement (1). Thus, this study examines the effectiveness of technical analysis signals around the earning announcements dates in Malaysian stock market. In doing so, this study applied and tested four technical indicators, namely Simple Moving Average (SMA), Relative Strength Index (RSI), Stochastic (K line), and Moving Average Convergence/Divergence (MACD) in Malaysian stock market. The sample of this study consisted of 30 largest capitalization companies from the main market of Kuala Lumpur Stock Exchange (KLSE). Meanwhile, the sample period covered from 2nd January 2014 to 31st March 2016. This study found that Moving Average Convergence/Divergence (MACD) significantly produced higher returns as compared to the other technical indicator before the earning announcement dates in financial year 2014 and 2015. The combined indicator of MA-MACD also found to have higher return in financial year 2015. The findings conclude that the technical analysis signals can be used to generate returns before earning announcement dates.

     

     

  • References

    2. style='font-size:8.0pt'>
    3. style='mso-spacerun:yes'> ADDIN EN.REFLIST
    4. field-separator'>[1] Mlonzi VF, Kruger J, Nthoesane MG. Share price reaction to earnings announcement on the JSE-ALtX : A test for market efficiency. South African Busienss Review. 2011;15(3):142-66.

      [2] Bessembinder H, Chan K. The profitability of technical trading rules in the Asian stock markets. Pacific-Basin Finance Journal. 1995;3:257-84.

      [3] Heng FTK, Azizan NA, Yeap LW. Technical Trading Systems as Crystal Balls in Reducing Risk: The Malaysian stock market. International Business Management. 2012;6(2):140-6.

      [4] Lai MM, Balachandher KG, Nor FM. An Examination of the Random Walk Model and Technical Trading Rules in the Malaysian Stock Market. Malaysian Accounting Review. 2007;6(2):99-121.

      [5] Aharony J, Swary I. Quarterly Dividend and Earnings Announcements and Stockholders' Returns: An Empirical Analysis. The Journal of Finance. 1980;35(1):1-12.

      [6] Fan JPH, Wong TJ. Corporate Ownership Structure and the Informativeness of Accounting Earnings in East Asia. Journal of Accounting and Economics. 2002;33(3):401-25.

      [7] Sulistiawan D, Hartono J. Can Technical Analysis Signals Detect Price Reactions Around Earnings Announcement?: Evidence from Indonesia. The International Journal of Business and Finance Research. 2014;8(1):113-23.

      [8] Holden CW, Subrahmanyam A. Long-Lived Private Information and Imperfect Competition. Journal of Finance. 1992;47(1):247-70.

      [9] Fama EF. Efficient capital markets: A review of theory and empirical work. Journal of Finance. 1970;25(2):383-417.

      [10] Dbouk W, Jamali I, Soufani K. The effectiveness of technical trading for Arab stocks. Emerging Markets Finance and Trade. 2014;50(4):5-25.

      [11] Nassir AM, Ariff M, Mohamad S. Weak-Form Efficiency of the Kuala Lumpur Stock Exchange: An Application of Unit Root Analysis. Pertanika J Soc Sci & Hum. 1993;1(1):57-62.

      [12] Balkiz O. Testing Informational Market Efficiency on Kuala Lumpur Stock Exchange. Jurnal Ekonomi Malaysia. 2003;37:3-20.

      [13] Hamid K, Suleman MT, Shah SZA, Akash RSI. Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Asia-Pacific Markets. International Research Journal of Finance and Economics. 2010(58):121-33.

      [14] Hussin BM, Ahmed AD, Ying TC. Semi-Strong Form Efficiency: Market Reaction to Dividend and Earnings Announcements in Malaysian Stock Exchange. IUP Journal of Applied Finance. 2010;16(5):36-60.

      [15] Yip PP, Isa M, Kester GW, Lee SP. Share Price Reaction to Dividend Announcements and the Interaction with Earnings Announcements in the Malaysian Stock Market. Asian Journal of Business and Accounting. 2010;3(2):101-20.

      [16] Isa MM, Ahmad R, Chan YW. Price behavior around earnings announcements of newly listed shares. Asian Academy of Management Journal. 1996;1(2):48-56.

      [17] Sanda AU, Ang J, Gupta GS. Behaviour of Excess Stock Return Around Earnings Announcement Day: A Test of the Efficiency of Kuala Lumpur Stock Exchange. 1998. p. 99-113.

      [18] Wong W-K, Manzur M, Chew B-K. How rewarding is technical analysis? Evidence from Singapore stock market. Applied Financial Economics. 2010;13(7):543-51.

      [19] Nithya J, Thamizhchelvan G. Effectiveness of Technical Analysis in Banking Sector of Equity Market. IOSR Journal of Business and Management. 2014;16(7):20-8.

    5. mso-fareast-font-family:Batang;mso-ansi-language:EN-US;mso-fareast-language:
    6. KO;mso-bidi-language:AR-SA'>

  • Downloads

  • How to Cite

    Lee Yong Ming, K., & Jais, M. (2018). Effectiveness of Technical Analysis Signals Around the Earning Announcements in Malaysian Stock Market. International Journal of Engineering & Technology, 7(3.21), 109-113. https://doi.org/10.14419/ijet.v7i3.21.17104

    Received date: 2018-08-08

    Accepted date: 2018-08-08

    Published date: 2018-08-08