Tests of technical trading strategies in the emerging equity markets of Latin America and Asia

This study examines the potential profit of ten Variable Length Moving Aver age (VMA) technical trading rules in ten emerging equity markets in Latin A merica and Asia from January 1982 through April 1995. The average differenc e in buy - sell returns after trading costs for each rule and country are c ompared to a buy and hold strategy. Taiwan, Thailand and Mexico emerge as m arkets where technical trading strategies may be profitable. We find no str ong evidence of profitability for the other markets, However, we find that 82 out of the 100 country-trading rule combinations tested in ten emerging markets, disregarding their statistical significance, correctly predict the direction of changes in the return series. These findings may provide inve stors with important asset allocation information. (C) 1999 Elsevier Scienc e B.V. All rights reserved.