2023 - Volume 26, Issue 3

Investing Strategies for Trading Stocks as Overreaction Triggered by Technical Trading Rules with Big Data Concerns

By Min-Yuh Day, Paoyu Huang, Yirung Cheng and Yensen Ni

Abstract: The meaning of technical indicators is to transmit overshooting signals, which lead investors to believe that they may beat the market when the overshooting signals have been triggered. The study aims to examine whether investors could exploit profits when the overreaction signals were revealed by some technical indicators. Meanwhile, several findings are exposed. First, momentum (contrarian) strategies are suggested as overbought (oversold) signals emitted, which differ from our cognition. Second, higher cumulative abnormal returns (CARs) are demonstrated for buying instead of selling the constituent stocks of SSE 50 when overshooting signs occurred, after comparing with those of DJIA 30 and FTSE 100. Third, since superior performance is revealed, investors may apply the BB trading rule instead of others as overreaction trading signals are emitted.

Keywords: Herding Behavior; Investing Strategies; Overreaction; Technical Indicators; Big Data

JEL codes: G11

DOI: ...