Technical Analysis - Testing the performance of five commonly used technical indicators

Abstract

This thesis examines five commonly used technical indicators and their performance on five stocks listed at the Stockholm Stock Exchange during the time period January 2010 – March 2016. The research aims to see if the technical indicators can predict return in the upcoming period and also compare the profitability of the indicators versus the buy and hold strategy. Simple OLS regressions are used to analyze whether the different technical indicators are statistically significant for return in the upcoming period. The predictive ability of the technical indicators is overall quite poor as few of the indicators prove to be statistically significant. When comparing return per week invested between the examined technical indicators versus the buy and hold strategy, results find that the buy and hold strategy outperforms the Moving Average and the Moving Average Cross-Over indicator while the Moving Average Convergence Divergence and the Combined indicator provides higher average return per invested week for the majority of the stocks. These slightly contradictory results make it hard to determine whether weak form efficiency holds on Stockholm Stock Exchange and are much in line with the mixed results from earlier research made on other stock markets.