| At present,technical analysis has been widely used as one of the main tools for stock investment analysis in the trading decisions,but the debate about whether the technical analysis method is effective in the stock market has never stopped.The denial of technical analysis mainly occurs after the efficient market hypothesis is raised,early research believed that the market is useful,that is,all the information on the market has been fully revealed in the price and technical analysis lacks the ability to predict.However,with the further research,many scholars have suggested that different markets present different degrees of effectiveness.As the market effectiveness gets lower,the technical analysis method will be more likely to be competent.Judging from the development degree,the more mature the market development,the stronger the corresponding market effectiveness.Compared with the stock markets in developed countries,China’s stock market is still immature and the systems and regulations also need to be improved.In addition,there are not a few individuals with less strong professionalism among Chinese stock investors,whose speculative and other irrational behaviors may weaken the market effectiveness.The features above provide much space for the application of technical analysis methods in China’s stock market.According to the review of relevant domestic and foreign literatures,this study takes the A-share market as the research object,and utilizes the price pattern recognition algorithm as well as statistical test methods to study the effectiveness of 8 common technical form strategies such as the RTOP and RBOT.A price pattern strategy fund based on different price pattern strategies is innovatively proposed therefrom in order to verify the profitability of the fund,and then targeted suggestions are brought forward for the trading means of investment strategies with the price pattern as a technical analysis method.First,this study selects daily closing prices of the Shanghai Composite Index,CSI 300 Index and their 100 Shanghai stocks from February 3,2016 to January 23,2020 as samples,and quantitatively identifies 8 common basic price patterns through the price pattern recognition algorithm.After that,transaction simulation is executed in line with the trading signal generated after price pattern recognition,and the conditional daily rate of return corresponding to each price pattern strategy is calculated.On this basis,the K-S test is employed to perform the consistent distribution test on conditional and unconditional daily rates of return,which is followed by determination on the predictive ability of price pattern strategies.As for strategy profitability,the method of stochastic simulation experiment is adopted to discern whether the profit obtained by the price pattern strategy is superior to that by random traders.Moreover,market risk compensation and transaction costs are further removed from the gains by the strategy through the asset pricing model to identify excess returns.At last,combined with the specific performance of each price pattern recognition technology in 100 constituent stocks,individual stocks with the same price pattern strategy are merged.Therefore,10 corresponding morphological strategy funds are constructed and verified the effectiveness of the fund.The main conclusions in this research can be drawn as follows.Firstly,there are obvious differences in the effectiveness of different price pattern strategies on different indexes.The effective price pattern strategies in the Shanghai Stock Index are more than those of the CSI 300 Index.Specifically,the HS,RTOP and BBOT have the optimal statistical performance in the Shanghai Stock Index,while the HS and IHS perform best in the CSI 300 Index.In addition to this,the predictive capability of the selling price pattern combination strategy is significantly better than the buying one.Most price pattern strategies can obtain excess returns in the Shanghai Stock Index,but only the BTOP can acquire excess returns in the CSI 300 Index.Secondly,due to the large distinction in price trends and price volatility,the effectiveness of different price pattern strategies on individual stocks differs significantly.However,the price pattern strategy is effective for the stock as a whole.Except the IHS and BTOP,all other strategies can make more than half of the stocks’average daily returns positive.Thirdly,the price pattern strategy fund can improve return rates of this strategy in the overall market.Among the 10 price pattern strategy funds studied in this paper,most of them can gain higher excess returns than the national debt.In particular,the combination of selling price patterns is the most effective strategy with high stability in China’s stock market,which constitutes the highest annualized rate of return that can be achieved by morphological strategy funds.The major innovation of this study includes the following three aspects.Firstly,the price pattern recognition algorithm is used to quantify technical analysis indicators of the graphical price pattern with mathematical expressions,which is further identified in the price data as the effectiveness gets verified.Secondly,statistical analysis methods and test models are applied not only in the performance of price pattern strategies on the Shanghai Stock Index,CSI 300 Index and their 100 stocks,but also to test the effectiveness of price pattern strategies.Thirdly,a morphological strategy fund is innovatively proposed.By merging individual stocks that perform well in the same price morphology strategy and constructing a corresponding strategy fund,the companies can supply profitable new financial products to the capital market.Additionally,the shortcomings are mainly reflected in the following two respects.Firstly,the research range is in a non-bull and non-bear market environment,in which the effectiveness of different price patterns for various research objects may not necessarily be consistent with that in a bear or bull market.Therefore,further research is needed if the strategy effectiveness in bull or bear markets is regarded as the core.Secondly,in addition to being determined by the technical analysis method of price patterns,the future changes of stock prices should also be linked to the current price trend.Since the current trend of stock prices is difficult to quantify and thus absent from the strategy effectiveness verification in this study,there may exist a certain degree of deviation in the research results. |
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