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Peruvian evidence of the efficiency of technical analysis on the Lima Stock Exchange

Authors :
Jorge Diaz
Urpi Barreto
Yasser Abarca
Gabriel Suyo
Source :
Investment Management & Financial Innovations, Vol 21, Iss 4, Pp 301-313 (2024)
Publication Year :
2024
Publisher :
LLC "CPC "Business Perspectives", 2024.

Abstract

In emerging markets such as the Lima Stock Exchange, characterized by lower liquidity and market depth, investors face unique challenges in maximizing returns and mitigating risks. This study aims to evaluate the efficiency of technical analysis on the Lima Stock Exchange, focusing on 14 stocks from the S&P/BVL Peru General portfolio selected for their broad spectrum of economic sectors, high trading frequency, and consistency in the index, totaling 9,802 quotations during the period from June 21, 2021 to June 21, 2024. The results, excluding transaction costs, show that technical tools such as Momentum, Moving Averages, Stochastic Oscillator, and Williams Oscillator offer superior returns compared to the buy-and-hold strategy, especially in short periods of 5, 10, and 15 days, with average excess returns of 24.28%. However, when including transaction costs, only eight of the 14 stocks achieve excess returns, with the Relative Strength Index (RSI), Bollinger Bands, and Moving Averages standing out as the most efficient tools, especially over longer periods. These findings underscore the importance of careful management of transaction costs to optimize the benefits of technical analysis in emerging markets.

Details

Language :
English
ISSN :
18104967 and 18129358
Volume :
21
Issue :
4
Database :
Directory of Open Access Journals
Journal :
Investment Management & Financial Innovations
Publication Type :
Academic Journal
Accession number :
edsdoj.fe797427ea24519849372c1fe64c17b
Document Type :
article
Full Text :
https://doi.org/10.21511/imfi.21(4).2024.24