Does technical analysis work in the Russian market? Insights from MICEX (MOEX Russia) Index component stocks

Abstract

Emerging markets are generally considered less information efficient as compared to their more developed counterparts. This suggests potential arbitrage opportunities through the use of some forms of trading rules which emit buy/sell signals. In this paper, we explore the hybrid rule of two popular oscillators, Chaikin Oscillator and Relative Strength Index, in the emerging market of Russia. Data include constituents of the market barometer for the period 26/11/2011 to 31/07/2019. The whole sample is divided into three non-overlapping subperiods to distinguish each phase for the likelihood that the market is becoming more efficient in recent times. These subperiods also represent significant developments in the market such as unified trading platform, initial public offering of the Moscow Exchange, corporate governance reforms and rebranding of the benchmark index from MICEX to MOEX Russia Index. We find that the combined rule can yield positive returns and dominate the buy-and-hold rule especially at the start, although this outperformance diminishes. Further, from subperiod II onwards, passive strategy surpasses the hybrid rule in risk-return sense (Sharpe and Sortino measures) and this outcome intensifies. The results suggest that the Russian stock market progressively moves towards efficiency.