Publication
The evolution of the retail investor- a technical analysis approach
| Summary: | This paper focuses on the evolution of technical analysis over the course of the last 17 years, evaluating the correlation of such progress with the ascension in retail investing, given the development of the online brokerage industry during this period. In a first stage, a market study is performed to understand the growing magnitude of retail investing. In a second stage, technical indicators are evaluated for two distinct asset classes, with the purpose of understanding how the efficacy of signals generated by technical trading rules evolves, according to asset type. In a last stage, results are combined to determine if the evolutionary process on both metrics is related. We find a significant relation between the evolution in retail investing and the one of technical trading efficacy for technology stocks. We further find an increasing propensity for technical analysis to correctly predict price moves for small-cap ETFs, although the explanatory power of the evolution in retail investing is not significant in explaining such increase. |
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| Main Authors: | Ângelo, Bernardo Fraústo Do Santos |
| Subject: | Retail investing Online brokerage Technical analysis Efficient market hypothesis Stock market anomalies Technology stocks Small-cap index etfs Large-cap index etfs |
| Year: | 2021 |
| Country: | Portugal |
| Document type: | master thesis |
| Access type: | open access |
| Associated institution: | Universidade Nova de Lisboa |
| Language: | English |
| Origin: | Repositório Institucional da UNL |
| Summary: | This paper focuses on the evolution of technical analysis over the course of the last 17 years, evaluating the correlation of such progress with the ascension in retail investing, given the development of the online brokerage industry during this period. In a first stage, a market study is performed to understand the growing magnitude of retail investing. In a second stage, technical indicators are evaluated for two distinct asset classes, with the purpose of understanding how the efficacy of signals generated by technical trading rules evolves, according to asset type. In a last stage, results are combined to determine if the evolutionary process on both metrics is related. We find a significant relation between the evolution in retail investing and the one of technical trading efficacy for technology stocks. We further find an increasing propensity for technical analysis to correctly predict price moves for small-cap ETFs, although the explanatory power of the evolution in retail investing is not significant in explaining such increase. |
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