TI  Vol.1 No.4 , November 2010
A Comparison of Stock Market Efficiency of the BRIC Countries
Abstract: This article compares the stock market efficiency of Brazil, Russia, India and China (commonly referred to as BRIC). The profitability of trading rules associated with the Simple Moving Average (SMA), the Relative Strength Index (RSI), the Moving Average Convergence Divergence (MACD) and the Momentum (MOM) are evaluated. It is found that these indicators are most profitable in the Russian stock market. The Brazilian stock market is found to be the most efficient market among the BRIC. An explanation for such a discrepancy is provided.
Cite this paper: nullT. Chong, S. Cheng and E. Wong, "A Comparison of Stock Market Efficiency of the BRIC Countries," Technology and Investment, Vol. 1 No. 4, 2010, pp. 235-238. doi: 10.4236/ti.2010.14029.

[1]   W. Brock, Lakonishok and B. LeBaron, “Simple Techni- cal Trading Rules and the Stochastic Properties of Stock Return,” Journal of Finance, Vol. 47, 1992, pp. 1731-1764.

[2]   R. Hudson, M. Dempsey and K. Keasey, “A Note on the Weak Form Efficiency of Capital Markets: The Applica- tion of Simple Technical Trading Rules to UK Stock Prices – 1935 to 1994,” Journal of Banking and Finance, Vol. 20, 1996, pp. 1121-1132.

[3]   T. C. Mills, “Technical Analysis and the London Stock Exchange: Testing Trading Rules Using the FT30,” In- ternational Journal of Financial Economics, Vol. 2, 1997, pp. 319-331.

[4]   J. L. Treynor and R. Ferguson, “In Defense of Technical Analysis,” Journal of Finance, Vol. 3, 1985, pp. 757-773.

[5]   K. Y. Kwon and R. J. Kish, “Technical Trading Strate- gies and Return Predictability: NYSE,” Applied Financial Economics, Vol. 12, 2002, pp. 639-653.

[6]   T. T. L. Chong and T. H. Lam, “Are Nonlinear Trading Rules Profitable in the U.S. Stock Market?” Quantitative Finance, Vol. 10, No. 9, 2010, pp. 1067-1076.

[7]   A. D. Martin, “Technical Trading Rules in the Spot For- eign Exchange Markets of Developing Countries,” Jour- nal of Multinational Financial Management, Vol. 11, 2001, pp. 59-68.

[8]   C. I. Lee, J. C. Gleason and I. Mathur, “Trading Rule Profits in Latin American Currency Spot Rates,” Interna- tional Review of Financial Analysis, Vol. 10, 2001, pp. 135-156.

[9]   P. Ahmed, K. Beck and E. Goldreyer, “Moving Average Technical Trading Strategies for Currencies of Emerging Economies,” Managerial Finance, Vol. 31, 2005, pp. 14-28.

[10]   B. Craig, M. Eichenbaum and S. Rebelo, “The Returns to Currency Speculation in Emerging Markets,” American Economic Review, Vol. 97, No. 2, 2007, pp. 333-338.

[11]   T. T. L. Chong and H. Ip, “Do Momentum-Based Strate- gies Work in Emerging Currency Markets?” Pacific-Ba- sin Finance Journal, Vol. 17, 2009, pp. 479-493.

[12]   A. Ito, “Profits on Technical Trading Rules and Time- Varying Expected Returns: Evidence from Pacific-Basin Equity Markets,” Pacific-Basin Finance Journal, 1999, Vol. 7, pp. 283-330.

[13]   F. Parisi and A. Vasquez, “Simple Technical Trading Rules of Stock Returns: Evidence from 1987 to 1998 in Chile,” Emerging Markets Review, Vol. 1, 2000, pp. 152- 164.

[14]   A. Hameed and S. Ting, “Trading Volume and Short Horizon Contrarian Profits: Evidence from the Malaysian Market,” Pacific-Basin Finance Journal, Vol. 8, 2000, pp. 67-84.

[15]   A. Gunasekarage and D. M. Power, “The Profitability of Moving Average Trading Rules in South Asian Stock Markets,” Emerging Markets Review, Vol. 2, No. 1, 2001, pp. 17-33.

[16]   J. Kang, M. H. Liu and S. X. Ni, “Contrarian and Mo- mentum Strategies in the China Stock Market: 1993- 2000,” Pacific-Basin Finance Journal, Vol. 10, 2002, pp. 243-265.

[17]   M. Ratner and R. P. C. Leal, “Tests of Technical Trading Strategies in the Emerging Equity Markets of Latin America and Asia,” Journal of Banking and Finance, Vol. 23, 1999, pp. 1887-1905.

[18]   E. J. Chang, E. J. A. Lima and B. M. Tabak, “Testing for Predictability in Emerging Equity Markets,” Emerging Markets Review, Vol. 5, No. 3, September 2004, pp. 295-316.

[19]   J. O’Neill, “Building Better Global Economic BRICs,” Goldman Sachs Economic Research Paper 66, 2001.

[20]   J. W. Wilder, Jr., “New Concepts in Technical Trading Systems,” Trend Research, 1978.

[21]   G. Appel, “The Moving Average Convergence Diver- gence Method,” Great Neck, NY: Signalert, 1979.

[22]   J. J. Murphy, “Technical Analysis of the Financial Mar- kets,” New York Institute of Finance, 1999.

[23]   T. Chande and S. Kroll, “The New Technical Trader,” John Wiley & Sons, 1994.

[24]   C. R. Harvey, “Predictable Risk and Returns in Emerging Markets,” Review of Financial Studies, Vol. 8, 1995, pp. 773-816.

[25]   C. Li, H. T. Yu and T. T. L. Chong, “Structural Change in the Stock Market Efficiency after the Millennium: The MACD Approach,” Economics Bulletin, Vol. 7, No. 12, 2008, pp. 1-6.