"Technical Analysis in Financial Markets"

Table 5.8: Testing for predictive ability. Nominal (p_n), White's (2000) Reality Check (p_W) and Hansen's (2001) Superior Predictive Ability test (p_H) p-values, if the best strategy is selected by the mean return criterion (Panel A) or if the best strategy is selected by the Sharpe ratio criterion, in the case of 0 and 0.25% costs per trade. The results are computed for an US-based trader who applies the technical trading rule set to the local main stock market indices recomputed in US Dollars.

Panel A Panel B

selection criterion Mean return Sharpe ratio

costs per trade 0% 0.25% 0% 0.25%

Data set p_n p_W p_H p_n p_W p_H p_n p_W p_H p_n p_W p_H

World MSCI 0 0 0 0 0.96 0.37 0 0 0 0.04 0.98 0.33

Argentina Merval 0 1 0.88 0 1 0.91 0 0.11 0.08 0 0.12 0.08

Brazil Bovespa 0 1 0.85 0 1 0.95 0 0.39 0.11 0 0.52 0.11

Canada TSX Composite 0 0 0 0 0.81 0.14 0 0 0 0 0.59 0.21

Chile IPSA 0 0.36 0 0 0.6 0.38 0 0 0 0 0.22 0.01

Mexico IPC 0 1 0.01 0 1 0.8 0 0.04 0 0 0.81 0.08

Peru Lima General 0 0 0 0 0.01 0 0 0 0 0 0.02 0

US S&P500 0 0.97 0.08 0 1 0.87 0 1 0.1 0.02 1 0.46

US DJIA 0 1 0.66 0.01 1 0.99 0 1 0.61 0.02 1 0.52

US Nasdaq100 0 1 0.44 0 1 1 0 0.86 0.02 0 1 0.3

US NYSE Composite 0 0.28 0.02 0 1 0.98 0 0.45 0.04 0.03 1 0.64

US Russel2000 0 0 0 0 0.94 0.02 0 0 0 0 0.86 0.04

US Wilshire5000 0 0.02 0 0.01 1 0.78 0 0.04 0 0 1 0.48

Venezuela Industrial 0 1 0.04 0 1 0.94 0 0 0 0 0.38 0.09

Australia ASX All Ordinaries 0 0.94 0.06 0 1 0.98 0 0.03 0.01 0 0.75 0.11

China Shanghai Composite 0 0.5 0.03 0 0.98 0.12 0 0.82 0.07 0 1 0.26

Hong Kong Hang Seng 0 0 0 0 0.83 0.81 0 0 0 0 0.58 0.06

India BSE30 0 1 0 0 1 0.79 0 0 0 0 0.88 0.18

Indonesia Jakarta Composite 0 1 0 0 1 0.11 0 0 0 0 0.02 0

Japan Nikkei225 0 0.97 0.57 0 1 0.8 0 0.63 0.08 0 0.7 0.08

Malaysia KLSE Composite 0 1 0 0 1 0.21 0 0 0 0 0.03 0.01

New Zealand NZSE30 0 0.99 0.68 0 1 0.92 0 0.78 0.24 0 0.96 0.29

Pakistan Karachi100 0 1 0 0 1 0.18 0 0.04 0 0 0.2 0.06

Philippines PSE Composite 0 0.92 0 0 0.93 0.08 0 0 0 0 0.02 0

Singapore Straits Times 0 0.99 0 0 1 0.82 0 0 0 0 0.22 0.03

South-Korea Kospi200 0 1 0.08 0 1 0.92 0 0.04 0 0 0.49 0.06

224

	Panel A						Panel B
selection criterion	Mean return						Sharpe ratio
costs per trade	0%			0.25%			0%			0.25%
Data set	p_n	p_W	p_H	p_n	p_W	p_H	p_n	p_W	p_H	p_n	p_W	p_H
World MSCI	0	0	0	0	0.96	0.37	0	0	0	0.04	0.98	0.33
Argentina Merval	0	1	0.88	0	1	0.91	0	0.11	0.08	0	0.12	0.08
Brazil Bovespa	0	1	0.85	0	1	0.95	0	0.39	0.11	0	0.52	0.11
Canada TSX Composite	0	0	0	0	0.81	0.14	0	0	0	0	0.59	0.21
Chile IPSA	0	0.36	0	0	0.6	0.38	0	0	0	0	0.22	0.01
Mexico IPC	0	1	0.01	0	1	0.8	0	0.04	0	0	0.81	0.08
Peru Lima General	0	0	0	0	0.01	0	0	0	0	0	0.02	0
US S&P500	0	0.97	0.08	0	1	0.87	0	1	0.1	0.02	1	0.46
US DJIA	0	1	0.66	0.01	1	0.99	0	1	0.61	0.02	1	0.52
US Nasdaq100	0	1	0.44	0	1	1	0	0.86	0.02	0	1	0.3
US NYSE Composite	0	0.28	0.02	0	1	0.98	0	0.45	0.04	0.03	1	0.64
US Russel2000	0	0	0	0	0.94	0.02	0	0	0	0	0.86	0.04
US Wilshire5000	0	0.02	0	0.01	1	0.78	0	0.04	0	0	1	0.48
Venezuela Industrial	0	1	0.04	0	1	0.94	0	0	0	0	0.38	0.09
Australia ASX All Ordinaries	0	0.94	0.06	0	1	0.98	0	0.03	0.01	0	0.75	0.11
China Shanghai Composite	0	0.5	0.03	0	0.98	0.12	0	0.82	0.07	0	1	0.26
Hong Kong Hang Seng	0	0	0	0	0.83	0.81	0	0	0	0	0.58	0.06
India BSE30	0	1	0	0	1	0.79	0	0	0	0	0.88	0.18
Indonesia Jakarta Composite	0	1	0	0	1	0.11	0	0	0	0	0.02	0
Japan Nikkei225	0	0.97	0.57	0	1	0.8	0	0.63	0.08	0	0.7	0.08
Malaysia KLSE Composite	0	1	0	0	1	0.21	0	0	0	0	0.03	0.01
New Zealand NZSE30	0	0.99	0.68	0	1	0.92	0	0.78	0.24	0	0.96	0.29
Pakistan Karachi100	0	1	0	0	1	0.18	0	0.04	0	0	0.2	0.06
Philippines PSE Composite	0	0.92	0	0	0.93	0.08	0	0	0	0	0.02	0
Singapore Straits Times	0	0.99	0	0	1	0.82	0	0	0	0	0.22	0.03
South-Korea Kospi200	0	1	0.08	0	1	0.92	0	0.04	0	0	0.49	0.06