Predicting market indexes using moving averages

Abstract

This study is an effort to analyze the predictive capabilities of the moving average indicator as a technical analysis tool. Major stock exchanges of the world are selected which represent the numerous markets of the world and provide a basis for global investment decision making. The data selected as a sample is the adjusted closing prices of major indexes of the United States, London, Tokyo, Hong Kong, Shenzhen and Bombay from July 1997 to July 2013. Regression results are consistent with the weak form of the efficient market hypothesis. Insignificant coefficients and inadequate capability of the models to explain the variability in the index values were found as a result which leads to the conclusion that historical data is ineffective when the change in market index values needs to be determined.