%0 Journal Article
%T Stock Price Synchronicity and Technical Trading Effectiveness
%A Lon-Fon Shieh
%A Chien-Hao Huang
%A I-Chia Chang
%A Dun-Yao Ke
%J Modern Economy
%P 1577-1598
%@ 2152-7261
%D 2022
%I Scientific Research Publishing
%R 10.4236/me.2022.1312085
%X This study investigates how stock price synchronicity, as a measure of
how <span>stock prices reflect market-wide
information relative to firm-specific information, explains the profitability
of moving-average (MA) technical trading. The stocks of firms with less
synchronicity have more information uncertainty (IU) (i.e., they reflect less
firm-specific information), which amplifies investorsĄ¯ underreaction bias and
the price momentum effect, and are therefore more profitable. Testing a sample
of stocks listed on the Taiwan and the Taipei stock exchanges over July
1997-June 2021, we provide evidence consistent with the synchronicity-related
IU hypothesis. For a low-synchronicity stock price quintile portfolio, the
abnormal returns of an MA strategy relative to a buy-and-hold strategy as
estimated by the Fama</span><span style=\"font-family:;\" \"=\"\">-</span><span style=\"font-family:;\" \"=\"\">French 5-factor model are high at 18.05% per annum and even higher for a
high-synchronicity stock price quintile portfolio (9.22% per annum). The MA
strategy for low-synchronicity stock price portfolio remains more effective
even when considering</span><span style=\"font-family:;\" \"=\"\"> equally and value-weighted portfolios, testing
various sub-periods, considering alternative MA lag lengths and controlling for
market variables such as liquidity, sentiment, economic policy uncertainty, and
economic cycle.</span>
%K Stock Price Synchronicity
%K Technical Trading
%K Information Uncertainty
%K Moving Average Strategy
%U http://www.scirp.org/journal/PaperInformation.aspx?PaperID=122116