Title: SMA and MACD combinations for stock investment decisions in frontier markets: evidence from Dubai financial market
Authors: Hazim El-Baz; Ibrahim Al Awadhi; Assia Lasfer
Addresses: Engineering Systems Management Graduate Program, American University of Sharjah, Sharjah, UAE ' GASCO, Abu Dhabi, UAE ' Engineering Systems Management Graduate Program, American University of Sharjah, Sharjah, UAE
Abstract: One of the most challenging financial decisions is when to buy and sell stocks. Frontier markets offer high profit opportunities but also have high risk. Consequently, technical analysis is used to assist in properly timing entry and exit points from stock trades. Previous research presented applications of technical analysis in developed and emerging markets since they, unlike frontier markets, exist in an environment of political stability, regulations, and liquidity. This paper shows how trade signals generated from Simple Moving Average (SMA) confirmed by Moving Average Convergence Divergence (MACD) can be used to minimise trading risk in frontier markets such as Dubai Financial Market (DFM). The results show that the standard time-periods for SMA and MACD do not apply well to frontier markets and that trade signals generated from SMA and confirmed by signals generated from medium to long-term MACD or vice versa result in excellent hit ratios.
Keywords: technical analysis; stock markets; SMA; MACD; DFM; frontier markets; stock investment decisions; Dubai; financial markets; simple moving average; moving average convergence divergence; trade signals; trading risk.
International Journal of Financial Engineering and Risk Management, 2013 Vol.1 No.2, pp.113 - 128
Published online: 08 Aug 2013 *Full-text access for editors Access for subscribers Purchase this article Comment on this article