Are technical indicators helpful to investors in china's stock market? A study based on some distribution forecast models and their combinations

Can investors use technical analysis to generate positive risk-adjusted returns by observing historical transaction data? The study investigates whether technical indicators (TIs) are beneficial to the returns and risk management of China's stock market investors. It is conducted from the perspective of a distribution forecast rather than a traditional point forecast. The study investigates the TIs' predictability on the distribution of returns. It also examines the TIs' impact on risk management. A high-dimensional-same-frequency information distribution forecasting model, the LASSO-EGARCH model, is built. The LASSO regression's results show that the TIs have limited 'explanatory power' for the return prediction. However, the adaptive moving average and turnover rate show significant and robust effects. The statistical evaluation and economic evaluation show that the TIs information's integration cannot improve the direction forecast's accuracy, nor does it have excess profitability. However, it enables the return distribution to have a better calibration. The above conclusion reveals that the usefulness of the analysis for China's stock market lies in its risk management when the stock price plunges, rather than in excess profits. This may provide a reference for investors who prefer the TIs' analysis.

Automated summary

The study investigates the impact of technical indicators on the returns and risk management of China's stock market investors. While the explanatory power of TIs for return prediction is limited, some specific indicators like adaptive moving average and turnover rate show significant effects. Overall, the integration of TIs does not improve direction forecast accuracy or profitability, but it does enhance the calibration of return distribution, especially beneficial for risk management during stock price plunges.