This study examines whether the technical trading strategies can outperform the unconditional buy-and-hold strategy to forecast stock price movements and earn excess returns, after adjusting transaction costs, in emerging Colombo Stock Exchange (CSE). The study uses daily market closing prices of All Share Price Index (ASPI), which is a composite index to represent whole market, for twenty five years from January 1985 to December 2010. The variable length moving average method and fixed length moving average method with sixteen different rules is used as the methodology to analyze data. The empirical findings of the study confirmed that the moving average trading strategies have statistically significant predictive ability in explaining the market and capable of generating excess return to investors. However after considering transaction costs the excess return is negligible.
How to Cite:
Fernando, P., (2014). Profitability of technical trading strategies in emerging Sri Lankan stock market. Kelaniya Journal of Management. 2(2), pp.32–50. DOI: http://doi.org/10.4038/kjm.v2i2.6549