Abstract
Efficient market hypothesis (EMH) and the random walk theory are the two central concepts that explains the
financial market efficiencies. According to the EMH and random walk theory, if a market is efficient, it is not possible to it is not possible to forecast future share prices with the use of historical stock prices. The profitability of
technical trading has been extensively debated previously, but as yet there is no consensus among the economists.
Therefore this gives an impetus to continue the study. I have done it by applying the moving average convergence/divergence (MACD) technical indicator, to roughly the last 10 years historical prices of the Bombay
Stock Exchange index, and tried to find out whether it can beat the normal market returns or not. And thereby having an idea as to which strategy should be followed by the investors.
References
Achelis, S. B. (2000). Technical Analysis from A to Z. McGraw-Hill.
Becker, L. A., & Seshadri, M. (2003). GP- evolved technical trading rules can outper form Buy and Hold. Sixth International Conference on Computational Intelligence and Natural Computing. North Carolina, USA.
Bonga, W. G. (2015). The Need for Efficient Investment: Fundamental Analysis and Technical Analysis. Social Science Research Network (SSRN).
Brock, W., Lakonishok, J., & LeBaron, B.(1992). Simple Technical Trading Rules and the Stochastic Properties of Stock Returns. Journal of Finance, 1731-1764.
Dao, B. T. (2013). VN30 Index: An Overview and Default Probability Analysis. Social Science Research Network (SSRN).