Will History Repeat Itself? Empirical Research on A-Share Candlesticks in China Based on Matching Method

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• Abstract

  This paper analyzes the predictability and profitability of the candlesticks strategy, which is the most basic type of technical analysis in China's stock market. By analyzing matched candlesticks samples most similar to the candlesticks of the current stocks in the past six months, we can buy the portfolios best in performance and sell the worst to obtain significant excess returns. The result keeps robust after risk adjustment. This paper verifies the rationality of the third hypothesis of technical analysis and shows that technical analysis has its own value of existence and outlook of growth.

  JEL Classification Numbers: G11, G12, G14
  Keywords: Matching Method; Candlesticks; Technical Analysis Hypothesis; Financial Market Anomalies