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urns is an important goal for academics and practitioners. Technical analysis has long aimed to devise trading rules suitable for application on stock markets. Early studies of Technical Analysis by Fama & Blume (1966) find t revealed that technical rules are unable to reliably predict future returns. A significant body of literature exists on TA in various financial domains. Results obtained in the 1960s and 1970s supported the “Efficient Market Hypothesis”, which states that the efficient nature of capital markets should mean that market data does not contain any discernable and exploitable patterns (Jensen & Bennington, 1970). Therefore, impulses from new information cannot be predicted. The market prices are best described as a random walk, and past price and volume information are worthless for predicting forecasting future market price behaviour. Relatively, the market behaviour of stock market participants was also studied. The misperception of regression to the mean was the psychological inclination affecting stock market participants during this time as manifested on predicting forecasting a trend continuation (Tversky, 1974). However, some results since the 1980s have appeared to indicate otherwise.
2. 1980’s
Many authors have examined the distribution and dependence (e.g., Gordon, 1985) of futures price changes. The few studies that have evaluated a possible change in price distributions and dependence are limited in statistical techniques and commodities tested. Although not backed by formal significance tests, Hudson, Leuthold, & Sarassoro (1987) suggested that price changes had become more normal over time. Very few Researches had comprehensively studied changes in daily return characteristics.
During the 1980s and early 1990s, investment in managed futures grew quickly. However, in the late 1990’s, futures fund returns had decreased and the value of assets invested in managed futures had stagnated along with returns (Pendley & Zurla, 2002). The decreased market volatility and price distortion caused by the growth of the industry were two possible explanations for this decrease. Definitely there must have been changes in the distribution of futures prices in order for returns to have decreased so dramatically. Technical trading strategies were profitable in foreign exchange markets and futures markets, but not in stock markets before the 1980s; other studies indicate that technical trading strategies consistently generated economic profits in a variety of speculative markets at least until the early 1990s (Park & Irwin, 2004).
3. 1990’s
A number of authors have examined the profitability of technical trading (e.g., Osler & Chang, 1995; Boyd & Brorsen (1992) utilised simulated technical trading profits to find out which price statistics were correlated with technical returns. However, there are still no scholars who have attempted to no authors have examined possible causes of the recent decrease in returns to TA. In general, TA contains a large variety of trading techniques, which are based on past movements of the asset price and a few other related variables. Many of these techniques were applied by practitioners, as documented in Murphy (1999). However, the attitude of academia towards TA is reserved at best, due to economists’ persuasion that financial markets are well described by the efficient-market hypothesis. Under these circumstances, it is ob