The Effectiveness of Methods of Technical Analysis on the World's Stock Markets

<p>This abstract contents the original framework of the thesis &laquo;The effectiveness of methods of technical analysis on global stock markets&raquo;. First of all, in this paper the concept of technical analysis and its main axioms and principles are explained. Secondly, the methodology of technical indicators and oscillators is examined and determined in the paper. Thirdly, an empirical research using Metastock program is conducted in order to find out the effectiveness of using several hand-picked indicators to invest in stock markets based on the analysis of world&rsquo;s stock indexes.</p><p>In this study moving average crossover, MACD indicator and stochastic oscillator are tested on the period from 2000 to 2012 on 12 stock indexes, including S&amp;P500, MICEX, Nikkei225, FTSE100 and other indexes of markets of developed and developing countries. Finally the evaluation of the results is provided, i.e. the profitability of investment decisions made on technical analysis bias, and comparison of them to the results of other researchers in this field.</p><p>The objective of this study is to perform a detailed analysis of the expediency of implementing technical analysis in order to forecast trends of stock indexes in different countries and to make a profitable investment.&nbsp; Therefore the object of the research is key stock market indexes of 12 countries involved in my research. A thorough survey showed that there is not enough comprehensive literature about implementing technical analysis on stock markets of developed and developing countries and comparison between them. Most papers are dedicated to test trading rules on stocks of companies which are traded on the same market, but there is little research on global stock indexes. As regards international literature, a scientific research in this field is only developing so there is a vast ground for investigation.</p><p>In this study, the confirmation of two assigned hypotheses was managed with great certainty. In general, using of methods of technical analysis can be profitable, but requires careful adjustment of parameters and the selection of specific indicators, depending on the market conditions. Also on the emerging markets technical indicators and oscillators are considered to generate higher yields, compared with stock markets of developed countries.</p>