Technical Analysis: Exploring MACD in the Lebanese Stock Market

Ale J. Hejase; Ruba M. Srour; Hussin Jose Hejase; Joumana ` Younis

Ale J. Hejase School of Business, Islamic University of Lebanon, Beirut, Lebanon
Ruba M. Srour School of Business, Islamic University of Lebanon, Beirut, Lebanon
Hussin Jose Hejase Dean, Full Professor Faculty of Business Administration, Al Maaref University, Beirut, Lebanon http://orcid.org/0000-0002-4062-3144
Joumana ` Younis School of Business, Islamic University of Lebanon, Beirut, Lebanon

Keywords: Technical analysis, MACD, Lebanon, Lebanese stock market, BSE, ROI

Abstract

The stock markets have shown a great growth in the financial world that required traders to deal with many quantitative methods to analyze markets in order to predict commodities’ future prices. This study assesses the effect of technical analysis on the Lebanese stock markets by using a tool known as the Moving Average Convergence/Divergence (MACD) oscillator that explores how MACD can be utilized to optimize profits in the Lebanese stock exchange, during the trading process. The study is performed on closing prices of shares of six Lebanese banks and a real estate company, over a time period extending from the beginning of the year 2004 till the end of the year 2014. Results are meant to indicate whether MACD is able to optimize profits and forecast the Lebanese stock prices. It is concluded that the application of MACD in the decision making process for investing in the Lebanese stock market does not significantly contribute to the maximization of profitability on investments.

Downloads

Download data is not yet available.

References

Achelis, S. B. (2000). Technical Analysis from A to Z. New York: Equis International.

Appel, G. (2003, Summer). Become Your Own Technical Analyst: How to Identify Significant Market Turning Points Using the Moving Average Convergence-Divergence Indicator or MACD. Journal of Wealth Management, 6(1), 27-36.

Beirut Stock Exchange. (2017). BSE. Retrieved January 2, 2017, from http://www.bse.com.lb/

Cheung, Y.-W., Chinn, M., & Pascual, A. (2005). Empirical Exchange Rate Models of the Nineties: Are Any Fit to Survive? Journal of International Money and Finance, 1150–1175.

Chong, T. T.-L., & Ng, W.-K. (2008, Nov 15). Technical analysis and the London stock exchange: testing the MACD and RSI rules using the FT30. Applied Economics Letters, 15(14), 1111-1114. doi:10.1080/13504850600993598

Chong, T.-L., Ng, W.-K., & Liew, V.-S. (2014). Revisiting the Performance of MACD and RSI Oscillators. Journal of Risk and Financial Management.

Constable, Simon (2016, September 5). Fundamental vs. Technical Stock Analysts. Retrieved January 7, 2017, from

http://www.wsj.com/articles/fundamental-vs-technical-stock-analysts-1473127202

Du Plessis, A. W. (2012). The Effectiveness of a Technical Analysis strategy versus a Buy-and_hold strategy on the FTSE/JSE Top 40 Index shares of the JSE Ltd: The case of the Moving Average Convergence Divergence Indicator. Johannesburg: University of Johannesburg.

Edwards, R., Magee, J., & Bassetti, W. (2013). Technical Analysis of Stock Trends Tenth Edition. Danvers: Taylor & Francis Group, LLC

El Hokayem, J. (2015, December 9). Capital Market Conference. Beirut.

Frankel, J. A., & Rose, A. (1995). Empirical research on nominal exchange rates, in: Gene Grossmann and Kenneth Rogoff (eds). Amsterdam, North-Holland: Handbook of International Economics.

Gehrig, T., & Menkhoff, L. (2003). Technical Analysis in Foreign Exchange –The Workhorse Gains Further Ground. London.

Gold, S. (2015). The Viability of Six Popular Technical Analysis Trading Rules in Determining Effective Buy and Sell Signals: MACD, AROON, RSI, SO, OBV, and ADL. Journal of Applied Financial Research, 2, 8-29.

Hashem, Z. (2015). Lebanese Stock Market. Explaining Technical Analysis, Bollinger Band Methodology. Tyre: Islamic University of Lebanon.

Hejase, Ale J., El-Hokayem, Jihad S., & Hejase, Hussin J. (2016). Technical analysis in practice: Exploring Lebanese stock market. International Journal of Business and Management Research, 9(1), 28-43.

Hejase, A., & Hejase, H. (2013). Research Methods A Practical Approach for Business Students Second Edition. Philadelphia, PA: MasadirInc.

Huang, B., & Kim, Y. (2016). A Test of MACD Trading Strategy. Canada: Simon Fraser University Library.

Kabajeh, M. A., Al-Nu’aimat, S. M., & Dahmash, F. N. (2012). The Relationship between the ROA, ROE and ROI Ratios with Jordanian Insurance Public Companies Market Share Prices. International Journal of Humanities and Social Science. Vol. 2 No. 11, 115-120.

Khan, M. N. (2006). Technical Analysis Plain and Simple, Second Edition. Charting the Markets in Your Language. New Jersy: Pearson Education, Inc.

Kim, K., & Nofsinger, J. (2008). Behavioral finance in Asia. Pacific-Basin Finance Journal, 1–7.

Malkiel, B. (1973). A Random Walk Down Wall Street. United States: W. W. Norton & Company.

Marrs, J. (2000). Rule by Secrecy. New York: Harpercollins.

Menkhoff, L., & Taylor, M. P. (2007, December). The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis. Journal of Economic Literature, XLV, 936-972.

Murphy, J. J. (1999). Technical Analysis of the Financial Markets. New York: Printice Hall Direct, Inc.

Open Computing Facility. (2016). Technical Analysis: Introduction. Open Computing Facility, University of California, Berkeley. Retrieved December 12, 2016, from https://www.ocf.berkeley.edu/~jml/decal/techanalysis.pdf

Person, J.L. (2004). A Complete Guide to Technical Trading Tactics. Hoboken, New Jersey: John Wiley & Sons.

Pring, M. J. (1985). Technical Analysis Explained. The Successful Investor's Guide to Spotting Investment Trends and Turning Points. McGraw Hill.

Radović, M. (2010, March). SERBIAN STOCK MARKET TREND ANALYSIS FROM 1st March, 2006 TO 31st March, 2009. Economic Themes, 48(1), 117-130.

Rosillo, R., de la Fuente, D., & Brugos, J. (2013, April). Applied Economics, 45(12), 1541-1550. doi:10.1080/00036846.2011.631894.

Royston, Guy (2011, November 9). Assessing a quantitative approach to tactical asset allocation. (MBA Thesis). Gordon Institute of Business Science, University of Pretoria, South Africa.

Sarno, L., & Taylor, M. (2002). The Economics of Exchange Rates. Cambridge: Cambridge and New York: Cambridge University Press.

Sarno, L., & Taylor, M. P. (2001). The microstructure of the foreign exchange market: a selective survey of the literature. Princeton, New Jersey: International Economics Section, Princeton University.

Schwager, J. D. (1998). Getting Started in Technical Analysis. New York: John Wiley and Sons, Inc.

Subramanian, V., & Balakrishnan, K. P. (2014, Jan). Efficacy of Refined MACD Indicators: Evidence from Indian Stock Markets. IUP Journal of Applied Finance, 20(1), 76-91.

Suresh. (2013). A Study on Fundamental and Technical Analysis. International Journal of Marketing, Financial Services & Management Research, 2(5). Retrieved from http://www.indianresearchjournals.com

Taylor, M. P. (1995). The economics of exchange rates. Journal of Economic Literature, 13-47.

Vidotto, R. S., Tonissi Migliato, A. L., & Zambon, A. C. (2009, April-June). O Moving Average Convergence-Divergence como Ferramenta para a Decisão de Investimentos no Mercado de Ações. RAC - Revista de Administração Contemporânea, 13(2), 291-309.