Skripsi Ario Harsanto Full

UNIVERSITAS INDONESIA
VALUE DIAGNOSIS OF APPLICATION OF MOVING AVERAGE TECHNICAL TRADING RULES FOR INTRADAY STOCK TRADING IN INDONESIA STOCK EXCHANGE
SKRIPSI
Diajukan sebagai salah satu syarat untuk mencapai gelar sarjana ekonomi
ARIO HARSANTO 0606082182
FAKULTAS EKONOMI PROGRAM STUDI MANAJEMEN KEKHUSUSAN KEUANGAN DEPOK JULI, 2010
HALAMAN PERNYATAAN ORISINALITAS
Skripsi ini adalah hasil karya saya sendiri, dan semua sumber baik yang dikutip maupun dirujuk telah saya nyatakan dengan benar
Nama NPM Tanda Tangan
: Ario Harsanto : 0606082182 :
Tanggal
: Juli 2010
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HALAMAN PENGESAHAN Skripsi ini diajukan oleh Nama NPM Program Studi Judul Skripsi : : Ario Harsanto : 0606082182 : Manajemen : VALUE DIAGNOSIS OF APPLICATION OF MOVING AVERAGE TECHNICAL TRADING RULES FOR INTRADAY STOCK TRADING IN INDONESIA STOCK EXCHANGE
Telah berhasil dipertahankan di hadapan Dewan Penguji dan diterima sebagai bagian persyaratan yang diperlukan untuk memperoleh gelar Sarjana Ekonomi pada Program Studi Manajemen Keuangan Universitas Indonesia.
DEWAN PENGUJI Pembimbing Penguji Penguji : Dr. Irwan Adi Ekaputra, MM. : : ( )
Ditetapkan di Tanggal
: Depok : Juli 2010
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HALAMAN PERNYATAAN PERSETUJUAN PUBLIKASI TUGAS AKHIR UNTUK KEPENTINGAN AKADEMIS Sebagai sivitas akademik Universitas Indonesia, saya yang bertanda tangan di bawah ini: Nama : Ario Harsanto NPM : 0606082182 Program Studi : Keuangan Departemen : Manajemen Fakultas : Ekonomi Jenis karya : Skripsi demi pengembangan ilmu pengetahuan, menyetujui untuk memberikan kepada Universitas Indonesia Hak Bebas Royalti Noneksklusif (Non-exclusive RoyaltyFree Right) atas karya ilmiah saya yang berjudul: VALUE DIAGNOSIS OF APPLICATION OF MOVING AVERAGE TECHNICAL TRADING RULES FOR INTRADAY STOCK TRADING IN INDONESIA STOCK EXCHANGE beserta perangkat yang ada (jika diperlukan). Dengan Hak Bebas Royalti Noneksklusif ini Universitas Indonesia berhak menyimpan, mengalihmedia/formatkan, mengelola dalam bentuk pangkalan data (database), merawat, dan memublikasikan tugas akhir saya selama tetap mencantumkan nama saya sebagai penulis/pencipta dan sebagai pemilik Hak Cipta. Demikian pernyataan ini saya buat dengan sebenarnya. Dibuat di Pada tanggal : Depok : Juli 2010
Yang menyatakan
(Ario Harsanto)
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ABSTRACT Name : Ario Harsanto Study Program: Finance Management Title : Value Diagnosis of Application of Moving Average Technical Trading Rules For Intraday Stock Trading in Indonesia Stock Exchange The study brought in this paper analyzes the value of return generated from the employ of moving average technical trading rules for intraday stock trading in Indonesia Stock Exchange. In this paper, the author develops a value diagnosis approach under the application of bootstrap methodology to provide a result of general condition throughout time. The result under bootstrap methodology is that no single moving average rules tested (SMA[5], SMA[10], SMA[15], MA[5,50], MA[5,150], MA[5,200) provide a value greater than unconditional basic return for the series. This shown us that moving average rules do not really provide value for investors.
Keywords: Moving Average, Technical Trading Rules, Bootstrap Methodology, Intraday Stock Trading
ABSTRAK Nama : Ario Harsanto Program Studi : Manajemen Keuangan Judul : DIAGNOSA NILAI ATAS PENGGUNAAN MOVING AVERAGE TECHNICAL TRADING RULES PADA PERDAGANGAN SAHAM INTRADAY DI BURSA EFEK INDONESIA Penelitian yang dilakukan dalam skripsi ini menganalisis nilai dari return yang dihasilkan dari analisis teknikal moving average untuk perdagangan saham intraday pada Bursa Efek Indonesia. Pada skripsi ini, penulis menggunakan metodologo bootstrap untuk melakukan pendekatan diagnosa nilai guna menghasilkan hasil yang umum sepanjang waktu. Hasil atas metodologi bootstrap menunjukkan bahwa tidak satu pun teknik moving average yang diuji (SMA[5], SMA[10], SMA[15], MA[5,50], MA[5,150], MA[5,200) menghasilkan nilai return yang lebih besar dari return dasar dari pergerakan harga saham. Hal ini menunjukkan bahwa teknik moving average tidak sungguh-sungguh menghasilkan nilai lebih bagi investor. Kata Kunci: Moving Average, Analisis Teknikal , Metodologi Bootstrap, Perdagangan Saham Intraday
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TABLE OF CONTENTS COVER PAGE.... HALAMAN PERNYATAAN ORISINALITAS HALAMAN PENGESAHAN LEMBAR PERSETUJUAN PUBLIKASI KARYA ILMIAH ... ABSTRACT. ABSTRAK... TABLE OF CONTENTS.... LIST OF FIGURES. LIST OF TABLES.. 1. INTRODUCTION 1.1. Background....... 1.1. Problem Definition 1.2. Objective of The Study. 1.3. Benefits of The Study 1.4. Scope of The Study 1.5. Outline 2. LITERATURE REVIEW 2.1. Investment.......................... 2.2. Stock Return 2.3. Indonesia Stock Market...... 2.3.1. Stock Trading Process in Indonesia Stock Market... 2.4. Efficient Market Hypothesis.. 2.4.1. Random Walk Hypothesis... 2.5. Technical Analysis for Investment Decision. 2.5.1. Underlying Assumption of Technical Analysis 2.5.2. Advantages and Challenges of Technical Analysis.. 2.5.3. Methods of Technical Analysis 2.6. Bootstrapping Methodology for Financial Research.... 2.6.1. Bootstrap Methodology.... 2.6.2. Benefits of Bootstrap Methodology.. 2.6.3. Situations Where Bootstrap Will Be Ineffective.. 2.7. Previous Studies. 3. METHODOLOGY 3.1. Data.... 3.2. Data Processing Scheme.... 3.2.1. Computation of Basic Return... 3.2.2. Application of Technical Trading Rules.. 3.2.3. Application of Bootstrap Methodology 3.3. Process of Analysis.... 3.4. Hypotheses..... 3.5. Steps of Research... 4. ANALYSIS, RESULTS AND DISCUSSIONS 4.1. Description of The Research Sample
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i ii iii iv v vi vii ix x 1 1 4 4 4 4 5 6 6 7 8 9 9 10 11 11 12 13 15 15 16 17 17 20 20 23 23 23 26 27 28 29 30 30
4.2. Unconditional Basic Return Analysis... 4.3. Application of Moving Average Rule To The Original Data Series.. 4.3.1. Moving Average Rule to The Highest 5 Traded Stock (in Term of Trading Value)... 4.3.2. Moving Average Rule to Middle 5 Traded Stock (in Term of TradingValue)... 4.3.3. Moving Average Rule to The Lowest 5 Traded Stock (in Term of TradingValue).... 4.4. Application of Bootstrap Methodology..... 4.4.1. Bootstrap Methodology Using Manual Simulation in Microsoft Excel. 4.5. Further Analysis. 4.6. Analysis of Signal Generated From Observed Moving Average Rules.. 5. CONCLUSION AND RECOMMENDATION 5.1. Conclusion. 5.2. Recommendation.... 5.3. Suggestion for Future Research. REFERENCES...
33 36 37 44 51 62 62 88 107 94 94 95 96 98
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LIST OF FIGURES
Figure 3.1. Scheme of Data Extraction For The Study ......... 20 Figure 3.2. Illustration of Return Analyzed Under This Study .... 25 Figure 3.3. Illustration of Research Process Under This Study. 29
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LIST OF TABLES
Table 2.1 Schedule of Trading Session in Indonesia Stock Exchange ........ Table 3.1 List of Stocks Employed Under This Study ......... Table 4.1 Descriptive Statistic of 1 Period UBR From The Original Series Table 4.2 Descriptive Statistic Attributes of 1 Day UBR From The Original Series... Table 4.3 Result of The Application of Moving Average to Original BUMI... Table 4.4 Result of The Application of Moving Average to Original TLKM.. Table 4.5 Result of The Application of Moving Average to Original ADRO.. Table 4.6 Result of The Application of Moving Average to Original ASII..... Table 4.7 Result of The Application of Moving Average to Original BBRI.... Table 4.8 Summary of Result of The Application of Moving Average to Original Highest 5 Stock Series.. Table 4.9 t-Test Result For The Highest Traded Stock in Term of Trading Value.. Table 4.10 Result of The Application of Moving Average to Original TRUB Table 4.11 Result of The Application of Moving Average to Original BDMN... Table 4.12 Result of The Application of Moving Average to Original ITMG. Table 4.13 Result of The Application of Moving Average to Original BBNI. Table 4.14 Result of The Application of Moving Average to Original MIRA. Table 4.15 Summary of Result of The Application of Moving Average to Original Middle 5 Stock Series.. Table 4.16 t-Test Result For The Middle 5 Traded Stock in Term of Trading Value.. Table 4.17 Result of The Application of Moving Average to Original SGRO Table 4.18 Result of The Application of Moving Average to Original ELSA. Table 4.19 Result of The Application of Moving Average to Original INKP.. Table 4.20 Result of The Application of Moving Average to Original CTRP. Table 4.21 Result of The Application of Moving Average to Original CTRA Table 4.22 Summary of Result of The Application of Moving Average to Original Highest 5 Stock Series.. Table 4.23 t-Test Result For The Highest Traded Stock in Term of Trading Value Table 4.24 Summary of Hypotheses From Application of Moving Average Rules To The Original Series. Table 4.25 Summary of Result of The Application of Moving Average Rules to All Original Stock Series Table 4.26 t-Test Result Summary of The Application of Moving Average Rules to All Original Stock Series.. Table 4.27 Mean Comparison Between Unconditional Basic Return From Actual Series and The One Resulted From Moving Average Rules Table 4.28 Mean of 1 Period Unconditional Basic Return From The Bootstrapped Series Table 4.29 Result of The Application of Combined Moving Average Rules To The Bootstrapped Series..
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9 22 34 35 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 52 53 54 55 56 57 58 59 61 63 64
Table 4.30 Summary of Result Over The Fraction Value to Hypothesis Conclusion.. Table 4.31 Mean Comparison of Mean Return Generated From Sell Signal With Mean of Unconditional Basic Return in Actual Series and Zero Value... Table 4.32 Result of The Application of Simple Moving Average Rules To The Bootstrapped Series.. Table 4.33 Summary of Result Over The Fraction Value to Hypothesis Conclusion For Application of Simple Moving Average Rules.. Table 4.34 Summary of Mean Value of Signal Generated For Each Rule... Table 4.35 Result of t Test of Equality of Signals Generated Between Buy and Sell..
70 76 78 84 91 93
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CHAPTER 1 INTRODUCTION
1.1. Background In analyzing any investment activities, market participants always have many alternatives of method for them to forecast the future price of any asset. Some can use fundamental analysis, which involve a deep analysis upon an assets financial condition. Some others use market past data to predict the possible future price based on the statistic behavior of those data, which also known as technical analysis. In practical work, most market participants place more emphasis on technical analysis in doing their investment, especially for the one with a shorter time horizon (Oberlechner, 2001). Recent findings in the Hong Kong capital market also show that technical analysis is prior to fundamental analysis in usage of analysis for investment. (Lui and Mole, 1998). However, academics still treat this technical analysis with disdain. It is because its conflict with the market efficiency concept, one of the central pillars in the academic finance. By this condition, Malkiel (1981) mentioned technical analysis as an anathema to the academic world, and further also mentioned with most market stand in weak form, we may unable to precit future price with the available data of historical prices( Malkiel, 1981, pp. 118, 139, 165). Despite all of the problems to the academic world of finance, the main thing that remains an issue is whether this particular method of analysis is a profitable way? Some previous studies upon technical analysis have shown that technical analysis is not profitable once transaction costs is taken into account. Allen and Karjalainen (1999) in their study about the use of genetic algorithm to find technical trading rules found that the rules do not earn excess return with the buy hold system after transaction cost. But how does the technical perform in general condition? Some findings have shown that technical analysis may still perform as a value adding strategy to assist investor in better timing to buy any securities. Recent findings in the U.S.
Universitas Indonesia
stock market with Standard & Poor Depository Receipt has shown that technical analysis is not profitable, especially after data snooping bias is taken into account. (Marshall, et al. 2006). Some other studies also shown that this type of analysis generates a constant return until the period of 1987. For stock market in Indonesia, technical analysis is also well known and heavily used in generating investment decision in the stock market. To show this, the author conducted a replication of The Study of Intraday Technical Analysis in U.S. Equity Market (Marshall, et al. 2006), we use the keyword tests Technical Analysis in Indonesia in Google Indonesia search engine and shows that technical analysis have 1,180,000 result in English and 391,000 in Bahasa Indonesia (out of fundamental analysis with 153,000 results in Bahasa Indonesia and 240,000 in English). This short review can already shown us how the technical analysis is superior to fundamental analysis in Indonesia. Going specific, moving average is one type of technical analysis, which is heavily employed by market participants among many other methods of technical analysis. This method has well developed throughout the statistical world since one of its first development for investment analysis by Gartley in 1930. This method has the capabilities to predict future trading signal based on the average moves of past data, which really ease investors in doing it. Although the basic concept of moving average in predicting future trading signal is very easy, most chartists and investors believe it can generate a powerful yet reliable recommendation for investor. One of the proofs that showing how market participants really favor this particular method of technical analysis can be shown by looking at how well developed this method is. From the basic concept of Simple Moving Average (SMA) that exposed in 1930s, there has been many other development of moving average. Those developments are such as the combination of short moving average and longer moving average, exponential moving average, weighted moving average, wilder moving average, even quite an extended development like moving average convergence difference. In spite of the popularity of moving average rule, actually, what is the real value of this particular analysis method? Study by Brock, Le Baron and
Lakonishok (1992) has already shown that moving average (variable moving average and fixed moving average) has a positive return, and supporting that this method of technical trading rule really has value. But study that developed by Marshall, Cahan and Cahan (2006) shows that technical analysis, including moving average method, has no value in term of profitability. But this study that developed by Marshall, Cahan and Cahan (2006) testing on the application of technical analysis (including moving average rule) for intraday stock trading, which different from the one developed by Brock, Le Baron and Lakonishok (1992) that focuses on daily stock return throughout a long period. However, all the findings and study that assessing the value of technical analysis, including moving average, that described above only analyzing on the US Stock Market. But what does it like for stock market in Indonesia? Since regarding all the condition upon technical analysis and moving average, investors and market participants in Indonesia stock market also need to know the value of this methodology that heavily used. By this means, hopefully people, both academician and market practitioners, will have a better and objective view upon moving average as one type of technical trading rule. And this is what the author trying to develop by this study, providing a value diagnostic of the application of moving average for intraday stock trading. And for this study, the author will follow the most recent study of this value diagnostic study, which is the one developed by Marshall, Cahan and Cahan (2006). But still the basic concept of this study will follow the first concept of value diagnostic using random walk bootstrap methodology developed by Brock, Le Baron, and Lakonishok (1992). By that means, under this study, the author develops a study that diagnosing the value of employing moving average rules for intraday stock trading. This concept that the author brought in this study is simply the mix of the last two studies described. This study will provide the value of the application of moving average rule for intraday stock trading, employing bootstrap methodology. Specific concept of the study, including series of data that used for observation will be explained further in the next part of this paper.
1.2. Problem Definition The problem that will be observed in this study is whether the use of moving average as a form of technical analysis approach in intraday Indonesian equity market trading is really have value in comparison with the unconditional basic return or not? 1.3. Objective of the Study By the given problem definition, objective of this study is to find out the real value of employing moving average rules in intraday Indonesia stock market trading in comparison with the market real return This study will show the value of stock return gained from employing the moving average technical analysis trading rules observed. 1.4. Benefits of the Study The benefits of this study are as follow, 1. As a value comparison between return from employing moving average and unconditional basic return in Indonesia stock market. 2. As an answer to academic question over the value of employing moving average rules in making investment decision. 3. As a proxy for investor and fund mangers over the real value of moving average trading rule in Indonesia stock market. 4. Providing a better insight for market participants over the use of moving average rules for development of investment decision in Indonesian stock market. 1.5. Scope of the Study The Indonesia stock market subject to this study is the stock market data traded in the Indonesia Stock Exchange, with an adequate level of liquidity. This liquidity aspect is added as the claim by technical analyst that technical analysis approach is most reliable on actively traded stock (Morris, 1995). However, under this study, the author trying to develop a more general conclusion that may apply for all stock listed in the stock exchange. By this purpose, the author will observe 15 chosen stocks based on the highest stock traded in term of trading value in Indonesia Stock Exchange year 2009, middle 5,
and lowest 5. And for this study, the data will be used is intraday 10 minutes closing stock price data. This data was obtained from Indonesia Stock Exchange trading server directly, which access provided by a liaison of brokerage firm Wang Al Trading Associates and www.duniainvestasi.com. 1.5. Outline This paper is organized in the following way : CHAPTER 1 INRODUCTION The first section of this paper presents the background that lead the author to conduct this study, problem that is defined for this study, purpose of this study and benefits it may brings, and also the scope of the study itself. CHAPTER 2 LITERATURE REVIEW Review of relevant concept from and development of published literature in investment, technical trading rules, efficient market hypothesis, and the concept of bootstrap methodology for financial research. CHAPTER 3 METHODOLOGY This section covers comprehensively the methodology and tools used in conducting this study. Including presentation of stock price data chosen and the process of choice, application of bootstrap methodology for this study, and development of analyses under defined hypotheses. CHAPTER 4 ANALYSES, RESULTS AND DISCUSSIONS This section covers the main part concerning the study developed in this paper. Including presentation of output from applying moving average rules to observed stock data series. This section also presents the authors analysis regarding the results. CHAPTER 5 CONCLUSION AND RECOMMENDATION This section presents the conclusion obtained from this study and the following recommendation regarding the result. This section also presents a suggestion for future study as a follow up of this paper.
CHAPTER 2 LITERATURE REVIEW
2.1 Investment Investment is a form of present commitment to give some amount of money owned in order to gain a future income. The two important variables that is attached to the definition of investment is time and risk. The concept of investment also employs two basic concepts of take and give, giving some of certain present money, by expecting of taking future money with uncertainty. According to Sharpe et al (2005 pp. 10), there are some investment processes that should be followed by investor to attain a good investment decision. These steps are as follow: a. Setting investment policy and objective Investor needs to set up their investment policy and objective, including the amount of money to be invested as well as the maximum risk tolerance of investment. Investment objective also have to be stated clearly by return and risk of investment. b. Analyzing securities By this process, an investor has to assess the securities targeted individually. The two philosophy of this security analysis are: Using technical or fundamental analysis to analyze any securities that is mispriced by being over or under priced. For securities that still at this par, the choice of securities can be based on risk preference, investor risk, needs of cash, etc. c. Creating portfolio Based on the analysis result from previous section, the next step to do is to make a choice of assets to be included as investment portfolio including the weight of money invested to each asset.
By creating portfolio, investor may maximize the return and minimizing risk at the same time. d. Revising portfolio After a portfolio of asset is created, investors have to revise its portfolio to account for improvement in this portfolio. This improvement can be done by excluding any specific asset or adding other new asset in order to increase the return or minimizing the risk. e. Evaluating portfolio performance In this step investor will do a comparison of portfolio, which proxy is return and retained risk of the portfolio with market in overall. 2.2. Stock Return Home and Wachoviz in their seminal paper define return as a benefit which related with owner that includes cash dividend last year which is paid, together with market cost appreciation or capital gain, which is realization in the end of year. While Jones (2002, pp. 124) brought other definition of return as simply an aggregate of yield and capital gain (or loss). The term yield here defined as a series of cash flow paid periodically to stocks owners in term of dividend. While, capital gain (loss) is the difference between initial price with selling price. From that given definition, we can infer that a return of any particular stock may have a negative value. This condition occur when current price of a particular stock is lower its initial price. This return is counted based on historical price with following formula : (2.1.) Where, Rit Pit Pi(t-1) Dit : Return of stock i in time t : Price of stock i in time t : Price of stock i in time t-1 : Cash dividend of stock i in time t
While another method of counting return do not account for dividend, so any statistical analysis related to that return data would not be bias. This concept of return brought by Suad Husnan (1998, pp. 54). By this concept, then the amount of stock return will be computed as follow:
(2.2) Where, Rit Pit Pi(t-1) : Return of stock i in time t : Price of stock i in time t : Price of stock i in time t-1
2.3. Indonesia Stock Market The function of capital market as a non-bank financial intermediary in Indonesia is served by Indonesia Stock Exchange (Bursa Efek Indonesia). Legally it was established by July 10, 1977. But actually this capital market in Indonesia has been established ling before 1977. It was firstly established in 1912 in Batavia during the Dutch colonial era for the sole interest of Dutch East Indies. Then after the year of 1977, under the government of Soeharto era, the capital market in Indonesia is re-established with PT Semen Cibinong (now named as PT Holcim Indonesia Tbk, stock code is SMCB) as the first issuer, and named as Jakarta Stock Exchange (JSX). From this year of 1977, JSX in Indonesia performance was dull and did not have any significant development as stated in the history of Indonesian Stock Exchange that broadcasted in their website. This condition last until JSX was privatized in July 13, 1992. After the privatization Jakarta Stock Exchange were steadily developed and having its gold era. One of the developments that JSX has was the employment of Jakarta Automated Trading System (JATS, the first version) in May 22, 1995. The next improvement happened by the year of 2000, were all the trading activities happened in JSX went into script-less. The final major change that happened to this market was the merger of JSX and Surabaya Stock Exchange, whose focus on bond trading, into Indonesia Stock Exchange (IDX). Further, all the capital market
function in Indonesia done by this self-regulatory company, including the stock market function. 2.3.1. Stock Trading Process in Indonesia Stock Market In Indonesia Stock Exchange, stock trading is denominated in lot, whereas one lot equal to 500 stocks. There is no minimum trading limit in stock value, but only by its number of lot. In the stock market itself, the trading day is happened from Monday to Friday, and the market is closed in Sunday and Saturday. Each day, the market session itself is divided into two sessions. This division of market session is the same for Monday to Thursday, and special for Friday concerning the Moslems praying activities. The details of market session division are as follow, Table 2.1. Schedule of Trading Session in Indonesia Stock Exchange Trading Day Monday Thursday Friday Trading Session 1st Session 2nd Session 1st Session 2nd Session
Source : http://elearning.gunadarma.ac.id/docmodul/perkembangan_pasar_modal/BAB%202.%20MEKAN ISME%20PERDAGANGAN%20BEI.pdf , further explicated
Time 09.30 12.00 WIB 13.30 16.00 WIB 09.30 11.30 WIB 14.00 16.00 WIB
2.4. Efficient Market Hypothesis Efficient market hypothesis is one concept that has been widely developed among capital market. In general this term efficient market means that security prices reflect all available information in the market (Elton, Gruber, Goetzmann, Brown, 2007). Some basic premises to imply this efficient market concept are, a. Efficient market requires that a large number of rational market participants, which aim to maximize their profit, to analyze and value the securities traded in the market independently one to each other.
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b. The new information related to any securities comes to market in a random fashion with independent timing of announcement for each of information. c. Rational market participants, which aim is to maximize their profit, would adjust their security prices rapidly as the effect of new information. Although the adjustment itself will be imperfect, it is still unbiased. Further, this concept of efficient market concept has been subdivided into three forms of efficient market, as according to Fama (1970). The subdivisions of this efficient market concept are a. Weak Form The weak form of efficient market hypothesis assumes that all the available historical prices information already reflected in the current prices. By that assumption, this form then imply that past historical data over securities prices and returns are independent, and have no relationship with future prices and rates of returns. By this means, so technical trading rule that based on historical past data will only provide an investor with a little gain. b. Semi Strong Form The semi strong form of efficient market hypothesis assumes that all the publicly available information in the market, which is accessible for investor, already reflected in the current prices. By this assumption, any investors who based their investment decision on any public new information will only get a slight return from the securities risk adjusted return by the transaction made. Since the securities prices already take this new information into account. c. Strong Form The strong from of efficient market hypothesis contend that current securities prices already reflect all information regarding those securities, both public and private information. By this
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assumption, then there will be no group of investors who will gain above-average risk-adjusted rates of return from their investment decision. 2.4.1. Random Walk Hypothesis Another hypothesis related to efficient market hypothesis is random walk hypothesis. This hypothesis is actually the base of efficient market hypothesis itself. This hypothesis assumes that successive returns are independent and identically distributed. Thus, this hypothesis contended that stock prices come in random fashion. 2.5. Technical Analysis for Investment Decision Technical analysis is a methodology in security analysis discipline for forecasting the future direction of prices through the study of past market data, primarily price and volume (Kirkpatrick, Dahlquist, 2006, p.3) By this use of past market data, there are several rules of technical analysis that is commonly used by market participants. These rules are such as the relative strength index, moving averages, regressions, inter-market and intra-market price correlations, cycles or, classically, through recognition of chart patterns. By that definition, in setting an investment decision, technical analyst will only use the data from the market itself, because the market its own best predictors. Technical analysts also believe that a change in current price may be used for a prediction of forthcoming change in the fundamental variables, like company earnings or risk, before the signal already predicted by a fundamental analyst itself. 2.5.1. Underlying Assumption of Technical Analysis Since technical analysis based its analysis on historical data and trends to predict future behavior of the market, several assumptions regarding this practice should be hold. These assumptions firstly summarized by Levy (1966) to support this view of price movements in predicting future condition. The assumptions are, a. Market value (prices) of securities sold in the market is solely based on the interaction of its supply and demand.
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b. The supply and demand in the market are governed by rational and irrational factors, like economic factors as well as mood, opinions, and guesses. c. Both prices for an individual securities and overall value of the market tend to move under a specific trend, which is likely to persist for some period of time. d. The trend of a securities or market value will change as a reaction to any shifts in supply and demand relationships. And theses shifts itself can be detected sooner or later by the action of market itself. 2.5.2. Advantages and Challenges of Technical Analysis In contrary with fundamental analysis, technical analysis offers some advantages as admitted by most technical analyst. Reily and Brown (2005, pp. 585) state these advantages in contrast with fundamental analysis as follow, a. Fundamental analysts can only experience an extraordinary return only if they have obtained a new and material information before any other investors and market participants, and process it quickly and precisely. b. Technical analysis does not rely heavily on financial accounting statements. This come as a matter for technical analyst since they contended that accounting statements follow some special major problem, which are, 1) Lack a great deal of information that strongly needed by security analysts. 2) Accounting statements have many different standards that would likely lead to different in value, earning or any other component of financial statements. 3) Psychological and other non-quantifiable factors do not get reflected in a financial statement. Besides a series of advantages that can be obtained from technical analysis, as in term of technical analyst perspective, this method of investment decision also brings up some challenges and contradictions.
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The very first contradictions brought by technical analysis, as firstly stated in this paper background is its lack of supporting theorem that support the use of this method in predicting future prices and returns. That is why Malkiel (1981) called it as an anathema for the academic world. The next major issue that comes up with the existence of technical analysis is the concept of efficient market hypothesis, as previously explained in this chapter. Since for technical trading rules, for an investor to generate a superior risk-adjusted return, the market would have to be slow to adjust for any additional change in securities information. By this term, the market have to be inefficient. As the test to support the weak form of efficient market hypothesis, many studies have found that prices do not move in trend based on statistical tests of autocorrelation and runs. The third challenge for technical analysis is the obvious challenge that the past price patterns or relationships between specific market variables and stock prices may not be repeated. This enforces the condition by which the technique that previously worked might miss subsequent market returns. Another challenge is the condition which many price patterns become selffulfilling prophecies. This will be applied when most technical analyst predict that future price of a particular stock will reach certain level, they will buy the stock in way that the stock price will increase in price until the predicted level. The next challenge for this technical trading rule is that the success of a particular trading rule will encourage other market participants to adopt that trading rule. By this adoption, the resulting competition will neutralize the technique. Furthermore, the application of technical analysis relies on a great deal of subjective judgment heavily. For some specified price pattern, two technical analysts may result a different investment decision. This subjective judgment can also create change in standard value of technical values over time. 2.5.3. Methods of Technical Analysis There are many methods that widely used by market participants to generate an investment decision that may classified as technical analysis. Among those
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many techniques, methods that widely used is the one involving past securities price and volume movements. Herewith some of the most popular technical trading rules that involving historical prices data and volume movements, a. Filter Rules Standard filter rules were firstly introduced by Alexander (1962). This rule attempts to guide investors towards buying and selling patterns that will be the most profitable. Filter rules are created from analyzing the historical price trends of a security which involves buying (short selling) after price increases (decreases) by x% and selling (buying) after price decreases (increases) by x% from subsequent high (low). Some evidence from the market practitioner source of information mention that this particular trading rules is rarely successful for creating trading profit for investor. b. Moving Averages Rules Moving average rules is one of technical analysis form that widely used by market participants, which was developed by Gartley (1930). This moving average rule is an indicator frequently used in technical analysis showing the average value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance. In its most basic form, a buy (sell) signal is generated when the price moves above (below) the longer moving average, because at this point a trend is considered to be initiated. c. Support and Resistance Rules Support and resistance rules were mostly known as Trading Break Rules, were developed by Wyckoff (1910). This rule involves buying (short selling) when the closing price rises above (falls below) the maximum (minimum) price over the previous n periods.
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d. Trading Range Breakouts Rules A price channel is a pair of parallel trend lines that form a chart pattern for a stock or commodity. And a channel is said to be occurred when the high price over some previous n periods is within x% of the low over the previous n periods, excluding current price. e. On Balance Rules On balance rules is another method of technical analysis that about to be observed through this study. This method is calculated by keep a running total of the indicator for each period, and adding (subtracting) the entire amount of daily volume when the closing price increases (decreases). However under this study, the author not testing all those described type of technical analysis. This paper only examines the moving average technical trading rule. Since moving average is one of the most simple technical trading rules that mostly employed by market participants. 2.6. Bootstrapping Methodology for Financial Research 2.6.1. Bootstrap Methodology In statistics, bootstrap simply refers to the practice of estimating properties of an estimator (like variance) by measuring those properties when sampling from approximating distribution. According to Brooks (2002), bootstrap is used to obtain a description of the properties of empirical estimator by using the sample data points themselves, and it involves sampling repeatedly with replacement from the actual data. One of the available processes for this step of approximation is from the empirical distribution of the data itself. In this case, when the basic assumption of independent and identically distributed population is met, the approximation can be implemented through construction of resample of the observed data, which each is obtained through random sampling with replacement from the data set. To explain this method of simulation, we can follow as what Efron (1982) presents. Firstly we let a distribution of data (E1,, En) as n IID draws from a total distribution of F. Then we may let T(E1,,En;F) be a random variable of
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interest which may depend directly on F. Then from this distribution, let Fn be the empirical distribution that put mass 1/n on Ei, i=1,2,,n. From this the bootstrap methodology is done by approximating the distribution of T(E1,,En;F) under total distribution of F by the distribution of T(E1,,En;Fn) which is under the distribution of Fn. Further as the explication by Brock, Lakonishok and Le Baron (1992), bootstrap estimation then simply estimates (2.3) by (2.4) In this case, Prob{} denotes the probability of event {}. Bootstrap method then can be done by taking B bootstrap samples, (each of which consists of n IID draws from Fn . Then we may estimate under this bootstrap simulation of probability (2.4) by (2.5) where IA denotes the indicator function of event A when take the value 1 under occurrence of the event and 0 otherwise. 2.6.2. Benefit of Bootstrap Methodology Referring to Adr et al.(2008), bootstrapping methodology will be useful under following circumstances : 1. When the theoretical distribution of statistic is complicated or unknown. Since the bootstrapping methodology is unrelated to the sample distribution, it provides an indirect method to assess the properties of sample distribution and any of its derivation. 2. When the sample size is insufficient. Bootstrap methodology provides a way to account for any distraction of the underlying sample that may not be fully represents the population. 3. When a powerful calculation need to be performed, while only small sample of data available.
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Most power and sample size calculations are heavily dependent on the standard deviation of the samples statistics. One method to get an impression of the variation samples statistic is to use a small sample and perform bootstrap methodology to get the impression of variance. While according to Brooks (2002), the application of bootstrap methodology will have some use for finance studies. That is, bootstrap methodology may be used for detecting data snooping in the context of tests of the probability of technical trading rules. Data snooping occurs when the same set of data is used to construct trading rules and also to test them. Intra-generational data snooping is said to occur when, over a long period of time, technical trading rule that worked in the past continue to be tested, while the one did not perform will be faded away. 2.6.3. Situations Where Bootstrap Will Be Ineffective Further, Brooks (2002, pp.588) also mentions several conditions in which the use of bootstrap methodology in finance studies will be ineffective. Those conditions are, 1. Existence of outliers in the data With the existence of outliers within the data, the results for a given replication critically on whether the outliers appear, and how often it appears, in the sample universe. 2. Non-independent data The basic assumption that relied on bootstrap methodology is that data samples are independent of one another. This will obviously not hold if there are any autocorrelation within the data. The only solution for such circumstance is to use the moving block bootstrap. This method allows for dependence in the series by sampling whole blocks of observation at a time. However under this study, the author does not conduct any test to check existence of outliers or autocorrelation within the data. Since regarding to Brock, Le Baron and Lakonishok (1992) such test is not required. Following Efron
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(1982), this problem of outliers and autocorrelation can be solved by employing moving block bootstrap.
2.7. Previous Studies Previous studies over the profitability of technical analysis have been done in some other market. Brock, Lakonishok and LeBaron (1992) has tested the trading range break and moving average rules by using the Dow Jones index. This study then compared with four popular null models, the random walk, the AR(1), the GARCH-M, and the Exponential GARCH. This study found that buy signals consistently generate higher returns over the sells signals, and in general, the application of moving average and trading range break rules observed provides value for investors. Further study then done by Sullivan, Timmerman and White (1999), which evaluate the simple technical trading rules while quantifying data snooping effects and adjusting its effect to the universe from which the trading rules were drawn. These study developed by Sullivan, Timmerman and White has make an approach to fit the null models to the data, generating random series and comparing the result from running the rules on the original series to those from running on the randomly generated bootstrapped series, with Whites reality bootstrap technique. The only study found regarding the value and profitability of technical analysis in Indonesias equity market is the one developed by Fuadi (2007). This recent study for Indonesias equity market is made in replication of the study developed by Brock, Lakonishok, and Le Baron. This study was using the stock market index, Jakarta Composite Index, from June 1, 1990 until June 30, 2006 and focusing only to the moving average rules. And this study found that the return made from technical analysis, moving average rules, is positive and greater than zero in comparison with return from buy and hold strategy. However, the last findings in the technical analysis value diagnostic in Indonesia focus only on the return comparison between employing moving average and buy and hold strategy, and not assessing the real valu of moving average itself with the unconditional basic return of the series. This study developed by Fuadi (2007) also do not account for intraday equity market
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analysis, which actually is important because technical analysis is heavily employed by stock traders over the time horizon. The previous study that account for this intraday technical analysis and as well as the data snooping bias is the one that developed by Marshall, Cahan, and Cahan (2006) over the intraday stock market data in United States. But equivalent study for the equity market in Indonesia has not yet developed, and this is what is going to be captured by this study.
CHAPTER 3 METHODOLOGY
3.1. Data This study employ set of intraday stock data that is traded in Indonesian Stock Exchange between January 5, 2009 and December 30, 2009. This date parameter is chosen to exclude the effect of stock market crisis that hit Indonesia Stock Exchange by August 2008, under the assumption that Indonesia stock market in 2009 already exited the crisis. The year of 2009 itself is chosen so this study is employing the last updated data for a full time year. By this time range, then the list of securities that will be employed in this study will follow the process specified under following scheme :
Stocks Listed in Indonesia Stock Exchange Year 2009
Trading Value Analysis (Based on IDX Statistic)
5 Highest Stock in Term of Trading Value
5 Middle Stock in Term of Trading Value (Around The Median)
5 Lowest Stock in Term of Trading Value
Yes
No
Stock Data That Will Be Used For The Study
Stock Data That Will Not Be Used For The Study
Figure 3.1. Scheme of Data Extraction for The Study

Source : Authors Explication
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Based on that scheme, the very first criteria to get stocks data to be employed under this study is its trading volume. To capture a wide and common perspective of what is it likely to happened in the market, the author based its choice of data from 50 Most Active Stocks by Trading Value in 2009 (taken from IDX Statistics 2009). From this list of these 50 stocks, then the author choose the stock to be employed from the top five stocks in the list, the lowest stocks in the list, and mid five stocks in the list. This category of choice is based on the purpose to capture the general application of technical trading rule for all stocks traded in the market, whether its highly traded or not. From this first selection, those selected stocks should be checked whether they were fully traded in the formal trading days within January 5, 2009 to December 30, 2009 and were not suspended within those days. By those parameters of choice, stocks that will be employed in this study are presented in the following table :
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Table 3.1. List of Stocks Employed Under The Study

(presented in order of the top 5, middle 5, and lowest 5)
Stock Code BUMI TLKM ADRO ASII BBRI TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP
Company Name Bumi Resources, Tbk. Telekomunikasi Indonesia, Tbk. Adaro Energy, Tbk. Astra Internasional, Tbk. Bank Rakyat Indonesia, Tbk. Truba Alam Manunggal Engineering, Tbk. Bank Danamon, Tbk. Indo Tambangraya Megah, Tbk. Bank Negara Indonesia, Tbk. Mitra International Resources, Tbk. Sampoerna Agro, Tbk. Elnusa, Tbk. Indah Kiat Pulp and Paper, Tbk Ciputra Development Tbk Ciputra Propert, Tbk.
From these list of stocks, the author then collect 10 minutes intraday data of those stock. The idea of using 10 minutes intraday data is quite different with the journal that base this study. While Cahan, Cahan and Marshall (2006) in their seminal paper that tests the profitability of intraday technical analysis in US Stock Market use 5 minutes intraday data as their basis of study. It is all in order to capture more change in intraday stock prices of stock traded in Indonesia Stock Exchange, since by the interval of 5 minutes, there is still no distinct and rapid change in stock prices traded. By this type of data range and selection employed under this study, for a time range within January 5, 2009 and December 30, 2009 there will be 7956 data for each stock observed.
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The author collected these intraday data from Indonesia Stock Exchange database server as already explained in the Scope Of Study of this paper (see Chapter I).
3.2. Data Processing Scheme 3.2.1. Computation of Basic Return The first process to be employed to set of data that already gathered is to compute the basic unconditional return, simply as the formula of return by Suad Husnan (1998, pp. 54) which already presented in the previous chapter. This computation of return will be done per 10 minutes of data range gathered. And for overnight return, the author simply input the last closing price of day t-1 with the first closing price of a particular stock in day t to the return formula. By this scheme of computation, the author assume that all the given closing price data taken is a continuous process of trading activities. By this means of computing the return, for 7591 intraday stock price data that is employed, there will be 7590 stock price return data. Having these stock return data gathered, we will examine the distribution of statistic of these data using the following standard statistics: mean, standard deviation, skewness, kurtosis. Further in this study, this result of computed return will mentioned as unconditional basic return (and coded as UBR in the table presentation). 3.2.2. Application of Technical Trading Rules After having all the basic return computed, the author would also employ the technical trading rules that is analyzed under this study, which is the moving average to the actual closing price observed. The first rule to be employed is the moving average rule. Firstly the author employs the Simple Moving Average as firstly developed by Gartley (1930) with formula as follow, (3.1) Whereas, SMA(n) = the value of simple moving average with characteristic of n past data observed.
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Pt n
= Stock price observed at time t = the number of observation that characterize the SMA
This Simple Moving Average (SMA) we employ is the one that widely used by most chartist, SMA 5, SMA 10, and SMA 15. The SMA 5 itself means that computed moving average from the last 5 period of closing price (the last 5 closing price per 10 minutes), and so on for the SMA 10 and SMA 15. From this simple moving average computation, investment decision is based solely on the comparison between the closing price and the simple moving average computation. Whilst, buy (sell) signal is generated when the current closing price is higher (lower) than the computed simple moving average. Still with the moving average rule, the author also employ the most used moving average trading rule by investor, wheres combining a short moving average and longer moving average. A buy signal generated when a shorter moving average line intersect a longer moving average from below, and vice versa for the sell signal. The type of this moving average rule that we use as proxy is then the MA (5,50), MA (5,150), MA (5,200), which employ the moving average of 5 periods as the short term moving average and moving average 50 periods, 150 periods, and 200 periods as the longer moving average. From this generated signals from employed moving average rules, we will then compute the return of signal generated. The return that mentioned here, under the employ of such rule, is basically the gain of opportunity cost that investors may avoid (or experience) as the result of following the signal generated. To provide a better look upon this concept of return that will be treated along this study, including the unconditional basic return, we may consider the following scheme: Suppose there is a 10 set of stock price data that occur respectively in each of 10 periods observed. Those stock price series throughout the observed period will be as follow :
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10
Price UBR
100
100 0%
110 10%
115 5%
115 0%
110 -4%
105 -5%
105 0%
105 0%
110 5% 1% avg
Figure 3.2. Illustration of Return Analyzed Under This Study

From Figure 3.1. we can see the set of 10 stock prices mentioned. And the unconditional basic return is noted in the line name UBR (stands for Unconditional Basic Return). This computation is simply the change in price over each period observed, and the mean return (noted above the cell named AVG) is simply the average value over the 10 periods. Assuming any technical trading rules is employed (whether it is moving average or not) to the stock prices, there will be several buy and sell signal generated. Buy signal is most likely to occur in t=2, and t=9, since this is the last period before the price increase, and buy signal become useful and valuable at this moment. While sell signal is supposedly occur in t=5, when the price still about to decrease. From this generated signal, the return generated from buy signal then simply the gain from opportunity cost that experienced by investors. In which, for t=2, the return generated from buy signal is then 10% (because investors do not have to buy this stock in 10% higher price), and for t=9 the return generated from buy signal is 5%. Meanwhile, for the return generated from sell signal, the return is simply still the difference in price of stock sold with the previous period, which is 0% for the given sample. So for the return generated from sell signal, what we focus is still the real return experienced by investors by executing the signal. But for the buy signal, the return that we focus is the gain from opportunity costs that investors do not have to expensed by purchasing a stock with higher price. Further in this study, these return generated from sell and buy signal will be presented most in code (especially for table presentation). In which we will denote return generated from buys signal as RGBS and return generated from sell signal as RGSS.
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3.2.3. Application of Bootstrap Methodology Having the actual closing prices return computed using the basic return and also the application of technical trading rules, the next step under this study is to start simulating the actual closing price using the bootstrap methodology. We resample this closing price universe with replacement, by which the real closing price as the basic sample of data lists to resample the series. We resample this series up to 500 times to create a random walk series as the replication of the study developed by Brock, Le Baron, and Lakonishok (1992). As this previous study as well, by having a larger number of repetitions (up to 500 times) will generate a lower value of standard error (for 500 times of replication the standard error will be .
To employ the bootstrap methodology, the author will employ to methods, by using instant bootstrap by using formula in Microsoft Excel. a. Bootstrap Simulation Using Microsoft Excel For the second method in applying the bootstrap simulation, the author use basic formula from Microsoft Excel. The basic formula employed is the simulation of data using random number formulation, but for this bootstrap simulation the author employing limitation of data randomness, which is the actual series of data. This is what differentiates the simulation employed under this study with Monte Carlo simulation whereas the random number do not limited to the sample from actual series of data. The formula used for bootstrap in Microsoft Excel is as follow : =INDEX(sample,ROWS(sample)*RAND()+1,COLUMNS(sample)*RA ND()+1)1 (3.1) This formula basically aims to make an index in the specified space in Microsoft Excel worksheet. But in order to follow the bootstrap method, this indexing process will be only
formula of bootstrap simulation is taken from tutorial provided by Kardi Teknomo, PhD in SPC Software for Excel Guide Help. Referred to site http://people.revoledu.com/kardi/index.html
!"This
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referred to the original data series, which is the sample in this formula. Having the original data series as set the sample and being put into the index formula, the index should also contain randomness characteristic of a simulation. So this formula also adds randomness in tem of its row and column, which the randomness will only refer to the specified sample as well. Having this actual closing price re-sampled, the next step is then to employ the technical trading rules to the simulation series and count the return. From this computed return from the application of technical trading rule to simulated series, we may infer the average return from employment of technical trading rules in general condition. This general term may taken into conclusion since the simulated bootstrap able to show us the general condition over time of the possibilities up and down condition of securities closing price, neglecting any time series effect such trend. Then to obtain the conclusion of profitability we conduct a t-test ratio from the mean return from the employment of technical trading rule in simulated series with the unconditional stock price return to show the equality (or inequality) between two results. 3.3. Process of Analysis Under this study, there are several methods of analysis to capture the value diagnostic of observed moving average technical trading rule. The very first analysis process is to review the value of the application of moving average trading rule to the original data series. The review process including three aspects whereas: (1) t-test probability analysis of buy and sell return from application of moving average with the basic unconditional return, (2) the fraction calculation of sell recommendation that generates positive return (as well as the one with buy recommendation), (3) t-test probability analysis of difference in buy and sell return from the application of moving average with the basic unconditional return, and (4) mean comparison between the return resulted from moving average rules and basic unconditional return, to determine which one has a greater value.
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The next analysis process is basically the same with the first one, except the data series that taken into consideration. Whilst in this second analysis process, the author employs the aspects of analysis in the first process onto the bootstrap simulated series. Then, the last analysis process is once again the duplication of the previous steps of analysis process. The main difference with the last process is whereas the comparison here is made between the application of moving average trading rule to the bootstrap simulated series, with the return from application of moving average trading rule to the original data series and also with the basic return from the original data series. 3.4. Hypotheses From described method of study and process of analysis, the hypotheses that will be tested under this study are as follow : 1. General Hypothesis As the main concept of this study is to show the equality or inequality of return generated from employing moving average rules and unconditional basic return, the general hypothesis will be, H0 = There is equality of return generated from moving average rules with unconditional basic return. (p value of t test >= 0.025, under two tailed test with 5% significance level). H1 = There is no equality of return generated from moving average rules with unconditional basic return. ( p value of t test < 0.025, under two tailed test with 5% significance level) This general hypothesis then will be constructed throughout this study, whether the one between the result of actual moving average return with unconditional return from original series, or the one with the bootstrap process. 2. Following Hypothesis For the following hypothesis, the concept is to view which resulted return have a bigger value to determine whether the employ of moving average is outperformed or not.
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H0 = Return resulted from employing moving average rules is not greater than the return original unconditional return. ( !-return moving average <= !-unconditional return). H1 = Return resulted from employing moving average rules greater than the return original unconditional return. ( !-return moving average > !unconditional return). 3.5. Steps of Research From the elaboration of methodology employed under this study, the steps of research will be as follow :
Observed Intraday Stock Prices Data
Applying Moving Average Trading Rules
Computation of Unconditional Basic Return
Bootstrap Process
Return From Application of Moving Average
Unconditional Basic Return
Applying Moving Average Trading Rules
Computation of Unconditional Basic Return
Return From Application of Moving Average
Unconditional Basic Return From Bootstrapped Series
Paired t Test
Paired t Test
Paired t Test
Hypothesis
Hypothesis
Hypothesis
Figure 3.3. Illustration of Research Process Under This Study

CHAPTER 4 ANALYSES, RESULTS, AND DISCUSSIONS
This part of study will present the result of each step of the study, including the analysis of it. 4.1. Description of The Research Sample As already explained in the previous chapter, this study examines the use of technical trading rules for intraday trading of 15 stocks listed in Indonesian Stock Exchange. These 15 stocks are chosen based on its trading value published in IDX Statistic 2009, which the author choose the top highest 5 traded stocks in term of value, the middle 5, and the lowest 5. Herewith brief profile of the 15 business entities which stocks chosen as the object of this study : 1. PT. Bumi Resources, Tbk. PT. Bumi Resources, Tbk. is a mining company, which mainly focus on coal mining. This company was firstly listed in the Indonesian Stock Market by the year of 1990. Currently the company owning several mining business units located around the world, though mostly is still in Indonesia. Those business units are like PT. Kaltim Prima Coal, Arutmin, Gallo Oil (Jersey) Ltd, and Enercorp Ltd. 2. PT. Telekomunikasi Indonesia, Tbk. PT. Telekomunikasi Indonesia, Tbk is a state owned corporation, which focus is providing telecommunication service in Indonesia. This company has been established since October 23, 1856. The stock of this company has already listed in Indonesia Stock Exchange under quote TLKM since November 14, 1995. This companys stock is also traded in New York Stock Exchange, London Stock Exchange and Tokyo Stock Exchange.
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3. PT. Adaro Energy, Tbk. PT. Adaro Energy, Tbk. is currently the second largest coal thermal producer in Indonesia. As the position itself, this company main business is in coal mining and energy mining as well. This company also operates the largest single coal mine in Indonesia, and is a significant supplier to the global seaborne thermal market. 4. PT. Astra International, Tbk. PT. Astra Internasional, Tbk was established in 1957 as a trading company, mainly in automobiles trading and also serves as authorized resellers for some automobiles brand in Indonesia. Since 1990, this company has started to go public by have its stock listed in Indonesia Stock Exchange. Currently this company has 6 different line of business, including automobiles, financial services, heavy equipment, mining and energy, information technology and also infrastructure. 5. PT. Bank Rakyat Indonesia, Tbk. PT. Bank Rakyat Indonesia, Tbk. is a state owned bank which also the oldest bank in the country as well. This bank has been established since 1895, with its first name Hulp-en Spaarbank der Inlandsche Bestuurs Ambtenaren . Since then, the bank keeps on growing until being one of the largest bank in Indonesia. And as its first value on establishment, until today the bank also keep on focusing on developing real sector and lower economic people through its banking services. 6. PT. Truba Alam Manunggal Engineering, Tbk. Firstly serve as a contractor agency corporation, PT. Truba Alam Manunggal Engineering was established in Balikpapan on February 1, 2001. But further by its development, this limited liability company also provides a one stop solution in construction and engineering, including electrical set up and planning. By its development, this company then experienced its rapid development, which made it well known by its power plant business altogether with the electrical set up that using coal energy.
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7. PT. Bank Danamon, Tbk. PT. Bank Danamon, Tbk. is the one of the first private limited liability banking corporation that exists in Indonesia. This bank was firstly established in 1956 inder the name PT. Bank Kopra Indonesia. It was 20 years later that it changed its name. In its development, PT. Bank Danamon Tbk has experienced a lot of changes, including change of ownership, as well as corporate structure and culture. Today, this company is one of the most well respected banking corporate in Indonesia. 8. PT. Indo Tambangraya Megah, Tbk. PT. Indo Tambangraya Megah, Tbk. is a leading Indonesian supplier of coal to the worlds energy markets. This company was established on September 2, 1987 and have its shares traded publicly in Indonesia Stock Exchange by December 18, 2008. 9. PT. Bank Negara Indonesia, Tbk. Altogether with other several state owned banking corporation, PT. Bank Negara Indonesia, Tbk is also one of the biggest bank in the country. This bank was established in 1946, which made it as the first bank that established by the government of Indonesia. In its process of development, this bank has served several crucial duties in the countrys monetary sector, including as a regulatory bank, and central bank. Today, this bank only serves as commercial bank, and considered as one of the biggest player in the market. 10. PT. Mitra International Resources, Tbk. PT. Mitra International Resources, Tbk. was firstly established under the name of PT. Mitra Rajasa, Tbk. This company is one of the leading oil and gas mining contractor in the country. Currently, this company owns the largest and growing fleet of land, as well as marine rigs and FPSO in the region. 11. PT. Sampoerna Agro, Tbk. First field planting within the Sampoerna Agro Group was done by PT Aek Tarum back in 1989 followed by the establishment of PT
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Sampoerna Agro Tbk (previously named as PT Selapan Jaya) in 1993 to operate oil palm plantations in South Sumatra region. Currently, PT Sampoerna Agro Tbk together with its subsidiary companies are one of the leading producers of palm oil and palm kernel in Indonesia. 12. PT. Elnusa, Tbk. PT Elnusa Tbk. (Elnusa) is the one and only national company that possesses combined competencies in upstream oil & gas services, namely geoscience, drilling and oilfield. Currently, this company possesses over 40 years of experience in integrated upstream oil & gas services industry with a clientele that is both multi-national and loyal. 13. PT. Indah Kiat Pulp and Paper, Tbk. PT. Indah Kiat Pulp and Paper Tbk is a company that manufactures various kinds of paper products. This company was established on December 7, 1976. The stock of this company was firstly listed for trading in Indonesia Stock Exchange on July 16, 1990. 14. PT. Ciputra Development, Tbk. PT Ciputra Development Tbk (Ciputra Development) is one of Indonesia leading property companies. Established in 1981, the development of large scale residential and commercial properties is the expertise and core business of Ciputra Development. Headquartered in Jakarta, Ciputra Development has spanned its operations and currently develops and operates 20 residential and commercial properties in 13 major cities throughout Indonesia 15. PT. Ciputra Property, Tbk. PT. Ciputra Property, Tbk. is one of the subsidiaries of PT. Ciputra Development, Tbk. Basically this company has the same profile and business with Ciputra Development.
4.2. Unconditional Basic Return Analysis Following the return computation developed by Suad Husnan (1998), the author has computed 1 period return (return per 10 minutes) of the available data. And from those comptations, the summary statistics is as follow :
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Table 4.1. Descriptive Statistic of 1 Period UBR From The Original Series
UBR stands for Unconditional basic Return. This table presents the descriptive attributes of computed unconditional basic return for each 10 minutes period closing stock price data. The first column (from left to right) lists all the 15 stocks observed. The second column presents the mean of calculated UBR from each stock. The third column presents the skewness of the 1 period UBR for each stock. The fourth column presents the volatility aspect of the UBR. The fifth column presents the kurtosis value from all distribution of observed UBR. While the last two columns presents the maximum value and minimum value throughout observation.
Mean ADRO ASII BBNI BBRI BDMN BUMI CTRA CTRP ELSA INKP ITMG MIRA SGRO TLKM TRUB 0.0001869 0.0001615 0.0001533 0.0000823 0.0000695 0.0001745 0.0001696 0.0001275 0.0001828 0.0001348 0.0001520 (0.0000225) 0.0001268 0.0000492 0.0001696 Skewness 0.7176522 0.9580290 0.4764170 0.6636319 (3.6911018) (0.3263303) 0.7121883 (0.1034159) 0.9235807 1.3547488 (0.0739710) (0.0128590) 0.4655794 0.3951398 0.9235033 Standard Deviation 0.0078675 0.0056399 0.0069108 0.0065657 0.0075289 0.0105027 0.0101292 0.0096370 0.0096626 0.0073571 0.0060803 0.0088927 0.0071434 0.0051521 0.0103033 Kurtosis 9.4046022 16.5089539 5.9221406 11.6645731 132.1430479 14.8586206 7.1716781 20.6029189 15.4214761 22.9420596 17.9378921 8.3330091 10.5081699 9.0743524 69.2854598 Maximum 0.0681818 0.0602837 0.0666667 0.0793651 0.0786517 0.0952381 0.0833333 0.0849673 0.1269841 0.1063830 0.0636042 0.0588235 0.0595238 0.0457143 0.1652893 Minimum (0.0729167) (0.0493274) (0.0476190) (0.0547945) (0.2320000) (0.1000000) (0.0649351) (0.1543210) (0.0952381) (0.0758621) (0.0750000) (0.1060606) (0.0681818) (0.0506329) (0.2168675)
From this summary statistic, shown that most stock (14 stocks observed out of 15 stocks observed) have a positive mean of return although it is all less than 1 percent. While MIRA stocks is the only stock with negative mean of return over the chosen time of observation. While from the volatility aspect, from all the 15 stocks observed, BUMI is the one with highest volatility of all, followed by TRUB, CTRA, and finally ASII as the least volatile of all. This volatility aspect will affect the employ of moving average rule onto the stock itself. Since stock with more volatility will of course less in favor to be analyzed using the moving average rule since there is more risk that the price will change regarding the volatility. Based on the skewness factor, from the observed 15 stocks, there are only 5 stocks that show some signs of skewness. While the other 10 stocks under the specified observation periods show no sign of data skewness. While from the kurtosis value, can be seen that all the original data series are leptokurtic. Also for
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the kurtosis aspect, we may see that a stock has quite low kurtosis, around 5, like BBNI, while some other has a very high one, around 132, like BDMN. To provide a better perspective upon the descriptive statistic of observed original data series, we will take a look on the 1 day return of the series and its statistical aspects. This 1 day return is computed using the same formula as the previous 1 period return, but using the change in price for a full 1 day trading ( the closing price from a specified time in day t will be computed with the closing price with exact same time from day t-1). And the statistical aspects of this return computation are as follow : Table 4.2. Descriptive Statistic Attributes of 1 Day UBR From The Original Series
UBR stands for Unconditional basic Return. This table presents the descriptive attributes of computed unconditional basic return for each a full day closing stock price data, comparing two set of data in the same time from day t with the one in day t+1. The first column (from left to right) lists all the 15 stocks observed. The second column presents the mean of calculated UBR from each stock. The third column presents the skewness of the 1 period UBR for each stock. The fourth column presents the volatility aspect of the UBR. The fifth column presents the kurtosis value from all distribution of observed UBR. While the last two columns presents the maximum value and minimum value throughout observation.
Mean ADRO ASII BBNI BBRI BDMN BUMI CTRA CTRP ELSA INKP ITMG MIRA SGRO TLKM TRUB 0.0055445 0.0048739 0.0045210 0.0022743 0.0021237 0.0053601 0.0047359 0.0031920 0.0049553 0.0038369 0.0045737 (0.0015853) 0.0036275 0.0012954 0.0056255 Skewness 1.8310874 0.5090733 1.0217319 0.3752917 0.5036817 0.5282927 1.3939029 1.8174576 2.8951659 2.0393049 0.8547774 1.2691451 0.4093608 0.0642378 3.6936850 Standard Deviation 0.0351496 0.0300236 0.0272259 0.0291619 0.0384983 0.0538906 0.0428920 0.0380193 0.0380532 0.0354435 0.0336126 0.0342311 0.0308170 0.0196712 0.0640960 Kurtosis 9.7300137 1.5738295 3.5678998 0.9675416 9.6113272 3.8850925 6.5359357 7.8537636 21.5784359 14.1115630 4.3770947 11.1612597 3.2160081 1.7607191 27.2199889 Maximum 0.2745098 0.1518987 0.1600000 0.1250000 0.2800000 0.3636364 0.3333333 0.2750000 0.4255319 0.3250000 0.2184874 0.2873563 0.1518325 0.1044776 0.5909091 Minimum (0.1290323) (0.1041009) (0.1084337) (0.1029412) (0.2080000) (0.2272727) (0.1818182) (0.1296296) (0.1842105) (0.2555556) (0.1209302) (0.2054795) (0.1496599) (0.0791367) (0.3389831)
From this extended observation upon extended version of statistical descriptive of the original series return, we may see that the value of mean in the 1 day return is bigger than the value of mean in the 1 period (10 minutes) return. From this finding, we may infer that the price change within intraday series is not
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as big as the price change within 1 day. Compared with the real series of closing price, this circumstance is logical since price change per 10 minutes is not likely to happen within the observed series. Especially for some stock, price change tends to happen only after one and a half day or more trading. Contrast change also applies for the skewness aspect, whereas under the observation of 10 minutes return, only some stocks show a positive sign of skew. While under this 1 day observation, no stocks that show having a skew. The difference also happens in the kurtosis observation, whereas under this 1 day return observation, data are more mesokurtic and not heavily located around the mean. As the mean higher in the 1 day return, standard deviation with this 1 day return is also bigger than the 10 minutes return. The inference that may taken into account is, once again, the more change in price within 1 day difference of observation rather than the 10 minutes in difference of observation. 4.3. Application of Moving Average Rule to The Original Data Series For the application of moving average rule into the original data series, will be provided in two part of analysis, as per individual stock and the summary of all stocks observed. Presentation of the application of moving average rule to the original data series in this paper will be divided into 3 parts according to the trading value, high, medium, and low. In the following result presentations, the statistical results are presented in several columns. Column N(Buy) presents the number of buy signal generated by the moving average rule employed within the observation, and whilst column N(Sell) presents the number of sell signal generated. Column Buy and Sell presents the mean of return generated by each signal. Column Buy>0 and Sell>0 presents the fraction of Buy and Sell signal that generates return larger than 0 throughout the observation. And column Buy-Sell presents the mean of difference between return from buy and sell signal. Whereas the rows of following statistical presentation table consist of the moving average rules tested under this study. The first row goes to the result of the application of Simple Moving Average Rule from the last 15
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periods. The second row presents the result of the application of Simple Moving Average from the last 10 periods, and the third row presents the application of Simple Moving Average from the last 5 periods. 4.3.1. Moving Average Rule to The Highest 5 Traded Stock (in Term of Trading Value). 1. BUMI Table 4.3 Result of The Application of Moving Average to Original BUMI
This table presents the result of employing moving average rules to the original BUMI Series. The first column lists all the 6 moving average rules tested. The second and third column presents the number of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Mean of RGBS 0.0011769 0.0019427 0.0024232 (0.0000826) (0.0000139) 0.0000477 Mean of RGSS 0.0010067 0.0017659 0.0022478 (0.0001089) (0.0000570) 0.0000233 Fraction RGBS>0 0.1316186 0.1903448 0.2060150 0.0015125 0.0019147 0.1575342 Fraction RGSS>0 0.1215809 0.1799373 0.2081454 0.0010083 0.0010212 0.0926214 Mean of RGBSRGSS (0.0001702) (0.0001768) (0.0001753) 0.0000263 0.0000431 0.0000240
Test SMA (1,15) SMA (1,10) SMA (1,5) MA (5,50) MA (5,150) MA (5,200)
N(Buy) 4066 4279 4786 135 69 3
N(Sell) 3904 3696 3194 133 68 3
Source : Authors explication
Based on the result of applying moving average to the technical trading rule, we may see that four out of six rules tested generates a positive mean return in both buy and sell signal. Whereas for all the application of simple moving average, all generates a bigger sell return than selling return, which can be inferred from the negative mean in buy sell signal return difference.
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2.
TLKM Table 4.4. Result of The Application of Moving Average to Original TLKM
This table presents the result of employing moving average rules to the original TLKM Series. The first column lists all the 6 moving average rules tested. The second and third column presents the numbers of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Mean of RGBS 0.0006484 0.0010337 0.0012146 (0.0000388) (0.0000232) (0.0001173) Mean of RGSS 0.0006031 0.0009853 0.0011671 (0.0000522) (0.0000310) 0.0000330 Fraction RGBS>0 0.1268102 0.1571860 0.1690353 0.0020238 0.0010249 0.1655722 Fraction RGSS>0 0.1293288 0.1597030 0.1754496 0.0012649 0.0006405 0.0323640 Mean of RGBSRGSS (0.0000453) (0.0000484) (0.0000475) 0.0000134 0.0000077 (0.0001506)
N(Buy) 4075 4224 4908 155 87 10
N(Sell) 3866 3722 3043 150 88 10
From the application of moving average to the original series of TLKM, we may see that all simple moving average rules generates positive mean return for both buy and sell signal generated. While all the combination of long and short moving average rules generate negative mean return for buy signal, and only one combination of moving average 5 and 200 that generates a positive return for sell signal.
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3.
ADRO Table 4.5. Result of The Application of Moving Average to Original ADRO
This table presents the result of employing moving average rules to the original ADRO Series. The first column lists all the 6 moving average rules tested. The second and third column presents the numbers of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
N(Buy) 4123 4322 4867 163 96 3
N(Sell) 3818 3624 3084 168 95 3
The result of application of moving average rules for original ADRO series is more or less the same with the one applied with original TLKM series, especially in term of negativity and positivity of the mean return generated. All the simple moving average rules also generate a positive mean return in both buy and sell signal. While only the combination of moving average 5 and 200 that generates positive mean return in sell signal generated, and for the buy signal generated, this combination of moving average all results a negative mean returns.
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4.
ASII Table 4.6. Result of The Application of Moving Average to Original ASII
This table presents the result of employing moving average rules to the original ASII Series. The first column lists all the 6 moving average rules tested. The second and third column presents the number of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Mean of RGBS 0.0007652 0.0009343 0.0012116 (0.0000126) 0.0000064 0.0001434 Mean of RGSS 0.0006115 0.0007772 0.0010529 (0.0000464) (0.0000173) 0.0000198 Fraction RGBS>0 0.2173416 0.2273535 0.2530747 0.0038260 0.0029712 0.3089559 Fraction RGSS>0 0.1913165 0.2216443 0.2611893 0.0024232 0.0018086 0.0249566 Mean of RGBSRGSS (0.0001537) (0.0001571) (0.0001587) 0.0000338 0.0000238 0.0001237
N(Buy) 3840 3925 4242 126 63 4
N(Sell) 4037 3957 3645 123 62 4
The result for the application of simple moving average rule to the original ASII series show a same result with the former series observed. The difference with the original ASII series happened with the application of combined moving average rule, whereas the combination of moving average 5 with 150, and also the combination of moving average 5 with 200, both generates a positive mean return for buy signal. Whereas the same with the other original series, combination of moving average 5 and 50 still generates negative mean return for both buy and sell signals.
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5.
BBRI Table 4.7. Result of The Application of Moving Average to Original BBRI
This table presents the result of employing moving average rules to the original BBRI Series. The first column lists all the 6 moving average rules tested. The second and third column presents the numbers of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
N(Buy) 4003 4148 4619 137 80 8
N(Sell) 3906 3766 3300 142 81 7
In term of positivity, the application of moving average rules to the original BBRI series shows quite an indifferent pattern with the one in original TLKM and ADRO series. This indifference not only happens for the mean return generated for buy and sell signal, but also for the difference of return from that two signals. The summary of this 5 highest traded stock in term of trading value is presented in the following table :
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Table 4.8. Summary of Result of The Application of Moving Average to Original Highest 5 Stock Series
This table presents the result of employing moving average rules to all the original highest stock in term of trading value observed series. The first column lists all the 6 moving average rules tested. . The second column presents the mean of return generated from buy signal (RGBS). The third column presents the mean of return generated from sell signal (RGSS). The fourth and fifth column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Test SMA (1,15) SMA (1,10) SMA (1,5) MA (5,50) MA (5,150) MA (5,200) Average Mean of RGBS 0.00088556 0.00132991 0.00165560 (0.00004210) (0.00001090) (0.00000871) 0.00063489 Mean of RGSS 0.00076016 0.00120088 0.00152638 (0.00007010) (0.00003530) 0.00002997 0.00056867 Fraction RGBS>0 0.14747297 0.18153720 0.19962820 0.00261283 0.00184945 0.19836173 0.12191040 Fraction RGSS>0 0.14288757 0.18071222 0.20593798 0.00147181 0.00110479 0.04360365 0.09595300 Mean of RGBS-RGSS (0.00012539) (0.00012903) (0.00012922) 0.00002800 0.00002439 (0.00003881) (0.00006168)
From the presented summary of the application of moving average rules to the 5 highest stock in term of trading value, we may see that all the tested simple moving average rules generate a positive mean return both for buy and sell signal. But the condition is that the return generated for buy signal is lower than sell signal, which cause a negative difference in mean buy-sell difference. By this summary, we can summarize it into a t-test result calculation to better describe the comparison of return from the application of moving average with the unconditional return. The summary with the t-test results is as follow :
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Table 4.9. T-Test Result For The 5 Highest Traded Stock in Term of Trading Value
This table presents the result of t-test value resulted from paired t-test. The paired t-test is constructed between the mean of unconditional basic return from the actual series and mean of return generated from buy signal, mean of return generated from sell signal, and mean of difference between RGBS and RGSS. In this table, we present both the mean return and t value. The mean return presented in the first row, while below the t value is presented inside bracket in bold. In this table we present the t test result for mean of RGBS, RGSS and mean of difference between RGBS and RGSS. This t-test resulted mean to test the null hypothesis of return equality between the particular mean of return from unconditional basic return and the respected return from each column. The significance level is 2.5% as the test is two-tailed test with 95% degree of confidence. Mean of RGBSMean of RGBS Mean of RGSS RGSS t Value t Value t Value 0.00088556 0.00076016 (0.00012539) SMA (1,15) (0.000560193) (0.000581172) (0.00109694) 0.00132991 0.00120088 (0.00012903) SMA (1,10) (0.002028894) (0.002475997) (0.000141471) 0.00165560 0.00152638 (0.00012922) SMA (1,5) (0.002026368) (0.002232773) (0.000166203) (0.00004210) (0.00007010) 0.07540792 MA (5,50) (0.005205941) (0.00509716) (0.004258018) (0.00001090) (0.00003530) 0.00002439 MA (5,150) (0.005737128) (0.005785146) (0.005706182) (0.00000871) 0.00002997 (0.00003881) MA (5,200) (0.014533714) (0.02699245) (0.002108507) Source : Authors explication
From the result, for the 5 highest stocks traded in term of trading value, there is only one result that supports the null hypothesis that the returns from moving average application equal the unconditional returns at the 5 percent significance level using a two-tailed test. The rule that supports it is the moving average (5,200) and it only applies for the sell returns (with probability of t-test 2.69% which is bigger than 2.5% as significance level for two-tailed test with 95% degree of confidence). For buy returns, the t-test result of 5 highest stocks traded in term of trading value, it shows that all tested moving average rules reject the null hypothesis of equality between unconditional return with the return from moving average application. The same also applies for the buy-sell return difference, assuming that this last variable tested as the net return for investors, shown that all moving average rules tested generates unequal return with the unconditional one.
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4.3.2. Moving Average Rule to The Middle 5 Traded Stock (in Term of Trading Value). 1. TRUB Table 4.10. Result of The Application of Moving Average to Original TRUB
This table presents the result of employing moving average rules to the original TRUB Series. The first column lists all the 6 moving average rules tested. The second and third column presents the number of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Mean of RGBS 0.000924 0.001291 0.001688 0.000010 (0.000016) 0.000209 Mean of RGSS 0.000884 0.001247 0.001645 (0.000070) (0.000048) (0.000010) Fraction RGBS>0 0.112010 0.134555 0.153409 0.004065 0.001287 0.107968 Fraction RGSS>0 0.124399 0.153380 0.172348 0.001143 0.000257 0.113783 Mean of RGBSRGSS (0.000040) (0.000043) (0.000043) 0.000080 0.000032 0.000220
N(Buy) 5319 5368 5637 106 61 5
N(Sell) 2591 2547 2283 105 62 6
From the application moving average rules to the original TRUB series, we may see that all the application of simple moving average rules generate a positive mean return both for buy and sell signal. But the generated sell signal is lower than the buy, which cause the difference of those two (buy minus sell) become negative. For the combination of moving average, only rule MA(5,150) that generates negative mean return for generated buy signal. Whereas for the sell signal, all the resulted mean returns are negative.
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2. BDMN Table 4.11. Result of The Application of Moving Average to Original BDMN
This table presents the result of employing moving average rules to the original BDMN Series. The first column lists all the 6 moving average rules tested. The second and third column presents the numbers of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
N(Buy) 4091 4213 4745 145 83 11
N(Sell) 3818 3701 3174 148 82 10
For original BDMN series, all the tested simple moving average rule generates a positive mean returns for both buy and sell return. But for the combination of moving average, all tested rules generate a negative mean return for buy return. And for the sell return, only MA(5,200) that generates a positive return. For the difference between return generated from Buy signal and Return Generated From Sell signal, we can say that from all tested rules mostly generate return generated from sell signal higher than return from buy signal.
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3. ITMG Table 4.12. Result of The Application of Moving Average to Original ITMG
This table presents the result of employing moving average rules to the original ITMG Series. The first column lists all the 6 moving average rules tested. The second and third column presents the numbers of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Mean of RGBS 0.000838 0.000994 0.001256 0.000001 (0.000014) 0.000014 Mean of RGSS 0.000695 0.000846 0.001109 (0.000049) (0.000043) 0.000030 Fraction RGBS>0 0.211931 0.211931 0.233933 0.005566 0.002691 0.256607 Fraction RGSS>0 0.210546 0.210546 0.245629 0.002151 0.001409 0.058170 Mean of RGBSRGSS (0.000148) (0.000148) (0.000147) 0.000050 0.000029 (0.000016)
N(Buy) 3942 4105 4454 148 79 5
N(Sell) 3999 3841 3497 146 77 4
The result of application of simple moving average rule is still the same for original ITMG series, whereas all results a positive mean return for both generated buy and sell signal. Whilst, with the combination of moving average, MA (5,150) generates a negative return for both sell and buy signal. From the generated sell signal, only MA(5,200) that generates a positive mean return. For this series, the application of simple moving average rules also generates the most positive return in compared with the previous analyzed stock. It shown by the value of fraction Buy>0 and Sell>0 presented, which reach more than 20 percent.
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4. BBNI Table 4.13. Result of The Application of Moving Average to Original BBNI
This table presents the result of employing moving average rules to the original BBNI Series. The first column lists all the 6 moving average rules tested. The second and third column presents the numbers of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
N(Buy) 4020 4267 4959 144 85 8
N(Sell) 3889 3647 2960 139 84 7
For BBNI original series, the simple moving average still generates a positive mean return for both generated buy and sell signal, with the value is higher with the generated sell signal. Whilst, all the combined moving average rules generate a negative mean return for generated buy signal, and for sell signal the positive return only generated under the application of rule MA(5,200).
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5. MIRA Table 4.14. Result of The Application of Moving Average to Original MIRA
This table presents the result of employing moving average rules to the original MIRA Series. The first column lists all the 6 moving average rules tested. The second and third column presents the numbers of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Mean of RGBS 0.001030 0.001555 0.001894 (0.000058) (0.000056) (0.000016) Mean of RGSS 0.001043 0.001573 0.001917 (0.000102) (0.000068) (0.000049) Fraction RGBS>0 0.099171 0.110701 0.120178 0.002045 0.001038 0.033497 Fraction RGSS>0 0.116762 0.116688 0.128326 0.000545 0.000259 0.097158 Mean of RGBSRGSS 0.000013 0.000018 0.000023 0.000044 0.000012 0.000033
N(Buy) 4857 5175 5756 166 91 2
N(Sell) 2988 2675 2099 163 92 3
From the presented result of application of moving average to the original MIRA series, we may see quite a contrast result. Whereas for the application of simple moving average, all generates a positive mean return (with buy return higher than sell, which makes the buy-sell mean returns are all also positive). But, the application of combined moving average rule all generates a negative mean return for both the generated buy and sell signal. The summary of this 5 stocks which trading value is around the median, presented in the following table :
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Table 4.15. Summary of Result of The Application of Moving Average to Original Middle 5 Stock Series
This table presents the result of employing moving average rules to all the original middle stock in term of trading value observed series. The first column lists all the 6 moving average rules tested. . The second column presents the mean of return generated from buy signal (RGBS). The third column presents the mean of return generated from sell signal (RGSS). The fourth and fifth column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Mean of RGBS 0.000923 0.001338 0.001608 (0.000022) (0.000023) 0.000023 0.000641 Mean of RGSS 0.000845 0.001259 0.001530 (0.000075) (0.000051) 0.000009 0.000586 Fraction RGBS>0 0.140129 0.160508 0.172675 0.003072 0.001595 0.143955 0.103655 Fraction RGSS>0 0.145317 0.167102 0.181896 0.001276 0.000591 0.074159 0.095057 Mean of RGBSRGSS (0.000079) (0.000079) (0.000078) 0.000053 0.000028 0.000014 (0.000024)
Test SMA (1,15) SMA (1,10) SMA (1,5) MA (5,50) MA (5,150) MA (5,200) Average
N(Buy) 4445.80 4695.40 5110.20 141.80 79.80 39.40 2418.73
N(Sell) 3457.00 3213.40 2802.60 140.20 79.40 6.00 1616.43
From this summary, we may see for the middle 5 stocks, the application of simple moving average rules are also generating a positive mean return for both generated buy and sell signal. By which, the value of return from generated buy signal is still lower than from the generated sell signal. For the combined moving average, only MA(5,200) that generates positive mean return for both generated buy and sell signal. To provide a better view regarding the summary of result, we may refer it to following table presenting t-test result :
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Table 4.16. T-Test Result For The Middle 5 Traded Stock in Term of Trading Value
This table presents the result of t-test value resulted from paired t-test. The paired t-test is constructed between the mean of unconditional basic return from the actual series and mean of return generated from buy signal, mean of return generated from sell signal, and mean of difference between RGBS and RGSS. In this table, we present both the mean return and t value. The mean return presented in the first row, while below the t value is presented inside bracket in bold. In this table we present the t test result for mean of RGBS, RGSS and mean of difference between RGBS and RGSS. This t-test resulted mean to test the null hypothesis of return equality between the particular mean of return from unconditional basic return and the respected return from each column. The significance level is 2.5% as the test is two-tailed test with 95% degree of confidence.
Mean of RGBS Mean of RGSS Mean of RGBSRGSS
SMA (1,15) SMA (1,10) SMA (1,5) MA (5,50) MA (5,150) MA (5,200)
t Value 0.000923 (0.000200871) 0.001338 (0.002390862) 0.001608 (0.001704494) (0.000022) (0.139980252) (0.000023) (0.059155556) 0.000023 (0.000142603)
t Value 0.000845 (0.001163487) 0.001259 (0.003625045) 0.001530 (0.001480151) (0.000075) (0.106939238) (0.000051) (0.05297737) 0.000009 (0.00012338)
t Value (0.000079) (0.042436566) (0.000079) (0.022269608) (0.000078) (0.139806915) 0.000053 (0.187654172) 0.000028 (0.070395567) 0.000014 (0.000218127)
From this t-test result, for the middle 5 stock, we have more moving average rules tested that supporting the null hypothesis of return equality between return from application of moving average and the unconditional return (under two-tailed, 5% significance level). For return resulted from the buy signal, MA(5,150) and MA(5,150) support the null hypothesis of return equality. This support from these two rules also apply under the return from sell signal. Whilst, taking the buy-sell difference as the real net return for investors into assumption, four out of six rules tested supports the null hypothesis of return equality. Thos are SMA(1,15), SMA(1,5),MA(5,50), and MA(5,150).
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4.3.3. Moving Average Rule to The Lowest 5 Traded Stock (in Term of Trading Value). 1. SGRO Table 4.17. Result of The Application of Moving Average to Original SGRO
This table presents the result of employing moving average rules to the original SGRO Series. The first column lists all the 6 moving average rules tested. The second and third column presents the numbers of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
N(Buy) 4008 4275 4985 149 92 3
N(Sell) 3901 3639 2934 151 93 2
The application of simple moving average rules to the original SGRO series is still no different in term of characteristic with the result in the previously observed original series which generates positive mean return for both buy and sell signal throughout all the simple moving average rules tested. Where for the combined moving average rules, for buy return, all rules tested generate a negative mean return. And for the sell return, only MA(5,200) that generates positive mean returns, which in the final makes its buy-sell difference into negative.
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2. ELSA Table 4.18. Result of The Application of Moving Average to Original ELSA
This table presents the result of employing moving average rules to the original ELSA Series. The first column lists all the 6 moving average rules tested. The second and third column presents the numbers of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
N(Buy) 4224 4464 5162 198 110 5
N(Sell) 3717 3482 2789 203 111 5
For the aspect of positivity, the application of moving average rules to the original ELSA series show no difference than what happened with the original SGRO series. 3. INKP Table 4.19. Result of The Application of Moving Average to Original INKP
This table presents the result of employing moving average rules to the original INKP Series. The first column lists all the 6 moving average rules tested. The second and third column presents the number of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Mean of RGBS 0.000923 0.001160 Mean of RGSS 0.000800 0.001032 Fraction RGBS>0 0.134783 0.139752 Fraction RGSS>0 0.129220 0.143417 Mean of RGBSRGSS (0.000124) (0.000128)
Test SMA (1,15) SMA (1,10)
N(Buy) 4247 4552
N(Sell) 3662 3362
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Table 4.19. Result of The Application of Moving Average to Original INKP (Continued)
Mean of RGBS 0.001460 (0.000017) (0.000012) 0.000068 Mean of RGSS 0.001330 (0.000050) (0.000055) 0.000063 Fraction RGBS>0 0.154060 0.002286 0.002316 0.127613 Fraction RGSS>0 0.162899 0.001143 0.000643 0.056891 Mean of RGBSRGSS (0.000130) 0.000032 0.000043 0.000006
Test SMA (1,5) MA (5,50) MA (5,150) MA (5,200)
N(Buy) 5219 152 100 15
N(Sell) 2700 157 104 16
For the application of moving average rules to the original INKP series, the application of all simple moving average rules also show positive mean return for both buy and sell return, with still bigger value in sell return. For the combined moving average rules, only MA(5,200) that generates positive mean return for buy return. However, this condition also applies for the sell return, in which the resulted mean return is still less than the buy return, which impact is positivity in buy-sell difference. 4. CTRP Table 4.20. Result of The Application of Moving Average to Original CTRP
This table presents the result of employing moving average rules to the original CTRP Series. The first column lists all the 6 moving average rules tested. The second and third column presents the numbers of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Mean of RGBS 0.001309 0.001762 0.002084 (0.000188) (0.000176) 0.000186 Mean of RGSS 0.001186 0.001635 0.001959 (0.000093) (0.000048) (0.000044) Fraction RGBS>0 0.115059 0.127117 0.137517 0.002286 0.001029 0.088166 Fraction RGSS>0 0.121760 0.132550 0.147241 0.000508 0.000257 0.064278 Mean of RGBSRGSS (0.000123) (0.000128) (0.000126) (0.000095) (0.000128) 0.000229
N(Buy) 4490 4703 5374 173 104 3
N(Sell) 3419 3211 2545 168 106 3
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The application of simple moving average to the original CTRP series also generates a full positive mean return for both buy and sell return, with sell returns are greater. For the combined moving average rules, all the tested rules generates a negative mean return for the generated sell signal. While for the buy signal, only MA(5,200) that generates positive mean return 5. CTRA Table 4.21. Result of The Application of Moving Average to Original CTRA
This table presents the result of employing moving average rules to the original CTRA Series. The first column lists all the 6 moving average rules tested. The second and third column presents the numbers of buy and sell signal generated with particular test, respectively. The fourth column presents the mean of return generated from buy signal (RGBS). The fifth column presents the mean of return generated from sell signal (RGSS). The sixth and seventh column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Test SMA (1,15) SMA (1,10) SMA (1,5) MA (5,50) MA (5,150) MA (5,200) N(Buy) 4411 4725 5527 152 94 0 N(Sell) 3562 3253 2456 152 90 1 Buy 0.001427 0.001852 0.002217 (0.000037) (0.000028) 0.000160 Sell 0.001256 0.001679 0.002046 (0.000105) (0.000056) (0.000049) Buy>0 0.111752 0.121835 0.129525 0.001260 0.001659 0.093356 Sell>0 0.111627 0.119704 0.134912 0.000630 0.000255 0.048390 Buy-Sell (0.000171) (0.000173) (0.000171) 0.000068 0.000028 0.000209
The result of application of the moving average rules to original series of CTRA shows no difference in positivity characteristic than the condition applied to original series of CTRP. This may be reasonable, since the stock CTRP is based from a subsidiary of CTRA, which also reflects in prices of these two stocks that tend to have same drifts. The summary of this 5 lowest traded stock in term of trading value is presented in the following table :
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Table 4.22. Summary of Result of The Application of Moving Average to Original Highest 5 Stock Series
This table presents the result of employing moving average rules to all the original lowest stock in term of trading value observed series. The first column lists all the 6 moving average rules tested. . The second column presents the mean of return generated from buy signal (RGBS). The third column presents the mean of return generated from sell signal (RGSS). The fourth and fifth column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
Test SMA (1,15) SMA (1,10) SMA (1,5) MA (5,50) MA (5,150) MA (5,200) Average N(Buy) 4276 4394 4882 165 100 5 2303.73 N(Sell) 3652 3389 2685 166 101 5 1666.47 Buy 0.001180 0.001616 0.001939 (0.000068) (0.000053) 0.000076 0.000782 Sell 0.001038 0.001470 0.001793 (0.000094) (0.000055) 0.000005 0.000693 Buy>0 0.124690 0.138095 0.149025 0.002105 0.001514 0.115120 0.088425 Sell>0 0.120881 0.139007 0.156283 0.000710 0.000462 0.053052 0.078399 Buy-Sell (0.000143) (0.000146) (0.000146) 0.000026 0.000002 0.000071 (0.000056)
From the summary of result from application of moving average rules to the 5 lowest stocks traded in term of trading value, we may still see that the application of simple moving average still always generates positive mean return for both buy and sell signal. And the mean return results throughout the tested rules are still higher for the sell returns. However, for the combined moving average rules, only MA(5,200) that generates positive result in mean return, for both sell and buy return. While the other two rules tested generates negative mean returns in both signals. For the fraction number of buy and signal that generates return with non zero value (means the rule contain value), the fraction numbers all are far from zero. By this value we may conclude that the tested rules have a contribution of value for positive returns. However, it is not a final and general conclusion, and to provide a better view we may take a look to the t-test result in the following table :
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Table 4.23. T-Test Result For The 5 Lowest Traded Stock in Term of Trading Value
This table presents the result of t-test value resulted from paired t-test. The paired t-test is constructed between the mean of unconditional basic return from the actual series and mean of return generated from buy signal, mean of return generated from sell signal, and mean of difference between RGBS and RGSS. In this table, we present both the mean return and t value. The mean return presented in the first row, while below the t value is presented inside bracket in bold. In this table we present the t test result for mean of RGBS, RGSS and mean of difference between RGBS and RGSS. This t-test resulted mean to test the null hypothesis of return equality between the particular mean of return from unconditional basic return and the respected return from each column. The significance level is 2.5% as the test is two-tailed test with 95% degree of confidence.
Mean of RGBS Mean of RGSS Mean of RGBSRGSS
SMA (1,15) SMA (1,10) SMA (1,5) MA (5,50) MA (5,150) MA (5,200)
t Value t Value 0.001180 0.001038 (0.000358902) (0.000481929) 0.001616 0.001470 (0.000647394) (0.000766647) 0.001939 0.001793 (0.000372793) (0.000417652) (0.000068) (0.000094) (0.008736623) (5.79077E-05) (0.000053) (0.000055) (0.002460559) (0.000100422) 0.000076 0.000005 (0.188142369) (0.005119917) Source : Authors explication
t Value (0.000143) (0.000227847) (0.000146) (0.000246598) (0.000146) (0.00024468) 0.000026 (0.109235576) 0.000002 (0.009116123) 0.000071 (0.286334488)
From the presented t-test result we can see that from the application of moving average rules for the 5 lowest stocks traded in term of trading value, only one moving average rule that supports the null hypothesis of return equality between unconditional return and the return from moving average rule (under two-tailed 5% significance level), for return generated from buy signal solely. The rule specified is MA (5,200). While for return generated from sell signal, no rule supports the null hypothesis. Taking the difference between buy and sell mean return into the real net return experienced by investors, there are two rules that support the null hypothesis of return equality, which are the MA(5,200) and MA(5,50). While the others reject the null hypothesis at 5% significance level.
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However, all of resulted and described conclusion above obtained under partial analysis upon the classified stocks. The summary of those partial conclusions is as follow : Table 4.24. Summary of Hypothesis From The Application of Moving Average Rules To The Original Series
This table presents the summary of hypothesis as resulted from the t-test. We present the result of hypothesis for each tested moving average rules. In this table we divide the result into three columns. The first column presents the result of test of hypothesis for return equality between the unconditional basic return with the return generated from buying signal. The second column presents the result of test of hypothesis for return equality between the unconditional basic return with the return generated from selling signal. The last column presents the result of test of hypothesis for return equality between the unconditional basic return with the r mean of difference between return generated from buying signal and return generated from selling signal RGBS RGSS RGBS-RGSS Highest 5 SMA (1,15) Reject H0 Reject H0 Reject H0 SMA (1,10) Reject H0 Reject H0 Reject H0 SMA (1,5) Reject H0 Reject H0 Reject H0 MA (5,50) Reject H0 Reject H0 Reject H0 MA (5,150) Reject H0 Reject H0 Reject H0 MA (5,200) Reject H0 Not Reject H0 Reject H0 Middle 5 SMA (1,15) Reject H0 Reject H0 Not Reject H0 SMA (1,10) Reject H0 Reject H0 Reject H0 SMA (1,5) Reject H0 Reject H0 Not Reject H0 MA (5,50) Not reject H0 Not reject H0 Not reject H0 MA (5,150) Not Reject H0 Not Reject H0 Not Reject H0 MA (5,200) Reject H0 Reject H0 Reject H0 Lowest 5 SMA (1,15) Reject H0 Reject H0 Reject H0 SMA (1,10) Reject H0 Reject H0 Reject H0 SMA (1,5) Reject H0 Reject H0 Reject H0 MA (5,50) Reject H0 Reject H0 Accept H0 MA (5,150) Reject H0 Reject H0 Reject H0 MA (5,200) Not Reject H0 Reject H0 Not Reject H0 Source : Authors explication
In order to provide a better understanding over the result of application of moving average rules to the original stock series, the author also conducted analysis over the employment of moving average rules to all the observed data simultaneously. The result of overall application of moving average rules to all the observed original data series is presented in the following table :
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Table 4.25. Summary of Result of The Application of Moving Average Rules to All Original Stock Series
This table presents the result of employing moving average rules to all the original stock series observed. The first column lists all the 6 moving average rules tested. . The second column presents the mean of return generated from buy signal (RGBS). The third column presents the mean of return generated from sell signal (RGSS). The fourth and fifth column presents the fraction value of RGBS and RGSS that have value greater than 0, respectively. And the last column presents the mean off difference between RGBS and RGSS (RGBS minus RGSS).
N(Buy) SMA (1,15) SMA (1,10) SMA (1,5) MA (5,50) MA (5,150) MA (5,200) Average 12743.20 13269.40 14676.60 449.80 258.80 50.20 6908.00 N(Sell) 11015.40 10355.80 8740.60 449.60 259.00 16.80 5139.53 Buy 0.000996 0.001428 0.001734 (0.000044) (0.000029) 0.000030 0.000686 Sell 0.000881 0.001310 0.001616 (0.000080) (0.000047) 0.000015 0.000616 Buy>0 0.137430 0.160047 0.173776 0.002596 0.001653 0.152479 0.104664 Sell>0 0.136362 0.162274 0.181372 0.001153 0.000719 0.056938 0.089803 Buy-Sell (0.000116) (0.000118) (0.000118) 0.000036 0.000018 0.000015 (0.000047)
From Table 4.25. we may see that the simple moving average rules tested are all generate a positive mean return for both buy and sell signal obtained. However the value of mean return in sell signal is higher, which cause the mean return in buy-sell difference becomes negative. While for the combined moving average, we may see that MA(5,50) and MA(5,150) generate a negative mean return both for buy and sell return. In which, the mean return generated for buy signal is still higher than the one generated for the sell signal. With this higher mean return in generated buy signal, the buy sell difference mean return becomes positive for the two combined moving average rules. Whilst, the difference appears for MA(5,200), where it results a positive mean return for both generated buy and sell signal. With also a higher value in mean return for generated sell signal, which finally also generates a negative mean return for buysell difference. Based on this result presented in Table 4.25. we may conclude that the application of simple moving average rule will provide investors a positive buy
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and sell return, with the framework to picture it solely. While, from the three combined moving average rules tested, we may infer that MA(5,200) is the best of all, which generates a positive mean return both for generated buy and sell signal. From the result, we also may see that all the tested moving average rules have a non zero fraction of positive return generated throughout all the data series. This show that moving average rules tested still have value to generate a positive fraction of positive return value. For the simple moving average rules tested, the values of this fraction of buy and sell return with return more than zero are all bigger than 13%. By this value of fraction, we can see that by applying the simple moving average rules tested to the observed original series, there will be at least 13% positive return throughout all the possible return that may come. For the combined moving average rules tested, MA(5,50) and MA(5,150) generates a fraction value that slightly far from 0%. And for MA(5,200) the fraction value generated is around 5%, bigger than the other two combined moving average rules. This outcome once again strengthen the position of MA(5,200) as the most powerful combined moving average rule than the other rules tested. To provide a better understanding about the value of application of these moving average rules, a t-test is also necessary. And the result of t-test for the application of moving average rules to the overall original stock series is presented in the following table :
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Table 4.26. T-Test Result Summary of The Application of Moving Average Rules To All Original Stock Series
This table presents the result of t-test value resulted from paired t-test. The paired t-test is constructed between the mean of unconditional basic return from the actual series and mean of return generated from buy signal, mean of return generated from sell signal, and mean of difference between RGBS and RGSS. In this table, we present both the mean return and t value. The mean return presented in the first row, while below the t value is presented inside bracket in bold. In this table we present the t test result for mean of RGBS, RGSS and mean of difference between RGBS and RGSS. This t-test resulted mean to test the null hypothesis of return equality between the particular mean of return from unconditional basic return and the respected return from each column. The significance level is 2.5% as the test is two-tailed test with 95% degree of confidence. Mean of Mean of RGBS Mean of RGSS RGBS-RGSS t Value t Value t Value 0.00099621 0.00088075 (0.00011583) SMA (1,15) (0.00000000) (0.00000000) (0.00000083) 0.00142797 0.00130971 (0.00011826) SMA (1,10) (0.00000000) (0.00000000) (0.00000090) 0.00173414 0.00161632 (0.00011782) SMA (1,5) (0.00000000) (0.00000000) (0.00000102) (0.00004390) (0.00007963) 0.00003574 MA (5,50) (0.00000033) (0.00000002) (0.00009039) (0.00002877) (0.00004715) 0.00001838 MA (5,150) (0.00000035) (0.00000002) (0.00002331) 0.00003022 0.00001490 0.00001529 MA (5,200) (0.00093024) (0.00000750) (0.00267863) Source : Authors explication
From the t-test result, we can see that from the applied moving average rules, none of the tested rules result support the null hypothesis of return equality between unconditional return and return from the application of moving average rules (two-tailed test and 95% degree of confidence). This conclusion can be obtained since from the counted p value for each moving average rule, and each return factor (buy, sell, or buy-difference), none of it have value bigger than 2.5% (as it is a two-tailed test with 5% significance level for both side. Then the application of moving average rules to the original series of stocks observed generates return that is different than the unconditional return, which applies for the buy return, sell return, and buy-sell difference. But what is the characteristic of this return difference between the unconditional return and the return from application of moving average rule? For
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a better view upon this trigger, we may take a look upon the mean comparison among the two conditions. Table 4.27. Mean Comparison Between Unconditional Basic Return From Actual Series and The One Resulted From Moving Average Rules
This table presents the comparison of mean return generated from buy signal (RGBS), return generated from sell signal (RGSS), the difference of RGBS-RGSS, and the unconditional basic return (UBR) from actual series. RGBS, RGSS, and RGBS-RGSS is compared with the UBR From Actual Series. The result of this comparison is simply Higher or lower presented on the second part of the table.
Parameter Mean of RGSS 0.00088075 0.00130971 0.00161632 (0.00007963) (0.00004715) 0.00001490 Attributes SMA (1,15) SMA (1,10) SMA (1,5) MA (5,50) MA (5,150) MA (5,200) Higher Higher Higher Lower Lower Lower Higher Higher Higher Lower Lower Lower Lower Lower Lower Lower Lower Lower Mean of UBR From Actual Series RGBS-RGSS (0.00011583) (0.00011826) (0.00011782) 0.00003574 0.00001838 0.00001529 0.000122932
Mean of RGBS SMA (1,15) SMA (1,10) SMA (1,5) MA (5,50) MA (5,150) MA (5,200) 0.00099621 0.00142797 0.00173414 (0.00004390) (0.00002877) 0.00003022
From Table 4.27. we can see that only simple moving average rules that generate mean return higher than the unconditional return. While all the combined moving average rules generate a subset mean return lower than the unconditional return. Combined with the resulted t-test that builds our conclusion to reject null hypothesis of return equality, this findings can lead us to a further conclusion as follow, 1. That all return resulted from simple moving average rule does not have an equal return with the unconditional return, in which the return generated is higher than the unconditional return. This lead us to an understanding that the employ of simple moving average technical trading rule to the original stock series observed really provides a value of benefit for investors. (H0 of return equality rejected, H0 that
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mean return of simple moving average is equal or less than the unconditional return also rejected). 2. All return resulted from combined moving average rule does not have an equal return with the unconditional return, in which the return generated is lower than the unconditional return. This lead us to an understanding that the employ of simple moving average technical trading rule to the original stock series observed does not really provides a value of benefit for investors. (H0 of return equality rejected, H0 that mean return of simple moving average is equal or less than the unconditional return accepted). However, this two conclusion generated for the tested moving average rules can only applied for the observed stocks within the specified time horizon of observation (year 2009, January 5 December 30). This conclusion of what the moving average rules provide to investor does not always apply for a general time horizon, or even a general stock series out of the observed data. So to provide a better diagnosis of the real value of applying moving average rule, we need to employ a way that may describe a general condition of the use of the rules. This is what brings us to employ the bootstrap methodology. Since to provide a powerful analysis regarding the employ of moving average rules throughout time and stocks series, we see that 1 year observation with 15 stocks still insufficient, and we need a bootstrap simulation to support the decision further. 4.4. Application of Bootstrap Methodology To attain a better view regarding the application of moving average rules, we employ the bootstrap methodology to the original data series. By employing this simulation methodology, we will have a series that comes from the original data, with a same distributional properties on average, but any kind dependence (linear or non linear autocorrelation) will have been removed by definition. In this study, the author employs bootstrap methodology processes through manual bootstrap formulation using Microsoft Excel. 4.4.1. Bootstrap Methodology Using Manual Simulation in Microsoft Excel With the manual bootstrap methodology simulation, we generate a new random series which sample is the original data series. We then conducted the
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calculation, for both basic return, simple moving average, and combined moving average using this new series. This process of re-sampling to generate new series and all of the calculation of its return is done up to 500 times as already well described in the previous chapter. After having the re-sampling process done, the result of mean of unconditional basic return of the observed data is presented in the following table : Table IV.28. Mean of 1 Period Unconditional Basic Return from The Bootstrapped Series
This table presents the result of mean from unconditional basic return for 1 period (10 minutes) from the bootstrapped series. Mean Return
0.170059137 0.123077793 Source : Authors explication
BUMI TLKM ADRO ASII BBRI TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP
0.055806885 0.015885784 0.099158984 0.168729544 0.055806885 0.309558923 0.055806885 0.164487999 0.187614765 0.054572879 0.069904397 0.185483439 0.104511111 0.148779276
From Table 4.28. we can see that the average value of 1 period unconditional return throughout the series observed is 12.3077%. This value is even much higher than the 1 period unconditional return from the original series with only average value of 1 period mean return only 1.2293% (calculated from the data in Table 4.1.). From this condition, we may infer that the bootstrap simulation has made the average unconditional basic return of the series higher.
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This value will further used as a factor of comparison for the t-test to generate a conclusion. However our basic value of analysis to compare is the unconditional return from the original series. Table 4.29. Result of The Application of Combined Moving Average Rules To The Bootstrapped Series
The original data series is re-sampled with replacement in order following the concept of bootstrap simulation. Then the moving average rules are employed to this series. The Buy aspect presents the mean return generated for buy signal, and Sell aspect presents the mean return generated for sell signal. Buy-Sell aspect is simply the mean return of difference between Buy and Sell. Fraction of Buy>Actual Return presents the value of fraction of specified aspect (buy), which generates a higher value than unconditional mean return in the actual series. Fraction of Buy>Bootstrapped Return presents the value of fraction of specified aspect (buy), which generates a higher value than unconditional mean return in the bootstrapped series. Fraction of Buy>0 presents the value of fraction of specified aspect (buy), which generates a higher value than 0. For other aspect (sell and buy-sell) it follows.
MA(5,50) BUMI TLKM ADRO ASII BBRI TRUB BDMN Mean of RGBS ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI TRUB Mean of RGSS BDMN ITMG BBNI MIRA SGRO ELSA INKP (0.020336) (0.008207) (0.015501) (0.018410) (0.011922) (0.019139) (0.011922) (0.018072) (0.015611) (0.015007) (0.016581) (0.013305) (0.012930) (0.016662) (0.016313) (0.015328) (0.018685) (0.009982) (0.018123) (0.021384) (0.018109) (0.024351) (0.018109) (0.020648) (0.027218) (0.012877) (0.013933) (0.028530) (0.025830) MA(5,150) (0.022482) (0.008568) (0.016256) (0.019645) (0.012465) (0.021496) (0.012465) (0.019319) (0.016706) (0.015762) (0.017427) (0.014353) (0.013740) (0.017711) (0.017688) (0.016406) (0.021150) (0.010407) (0.019244) (0.022815) (0.019091) (0.026537) (0.019091) (0.022158) (0.030058) (0.013569) (0.014705) (0.030962) (0.028301) MA(5,200) 0.141510 (0.001143) 0.024974 0.050937 0.009940 0.105127 0.009940 0.049259 0.057081 0.010245 0.015410 0.054438 0.026235 0.043047 0.050685 0.043179 0.217480 0.008245 0.053038 0.088908 0.029911 0.165188 0.029911 0.087056 0.101865 0.027735 0.035303 0.104039 0.056746
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Table 4.29. Result of The Application of Combined Moving Average Rules To The Bootstrapped Series (Continued)
MA(5,50) CTRA Mean of RGSS CTRP General BUMI TLKM ADRO ASII BBRI TRUB BDMN Mean of RGBS-RGSS ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI TRUB Fraction of Return Generated From Buy Signal>Unconditional Basic Return From Actual Series BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General Fraction of Return Generated From Buy Signal>Unconditional Basic Return From Bootstrapped Series BUMI TLKM ADRO ASII (0.020998) (0.023235) (0.020134) (0.001651) 0.001774 0.002622 0.002973 0.006187 0.005212 0.006187 0.002577 0.011607 (0.002129) (0.002648) 0.015226 0.012899 0.004336 0.006922 0.004806 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 MA(5,150) (0.022585) (0.024889) (0.021704) (0.001333) 0.001839 0.002988 0.003170 0.006626 0.005041 0.006626 0.002840 0.013352 (0.002192) (0.002722) 0.016609 0.014561 0.004874 0.007201 0.005299 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 MA(5,200) 0.079767 0.091979 0.078478 (0.075971) (0.009389) (0.028064) (0.037971) (0.019971) (0.060060) (0.019971) (0.037797) (0.044783) (0.017476) (0.019894) (0.049601) (0.030511) (0.036721) (0.041294) (0.035298) 1.000000 0.040000 1.000000 1.000000 1.000000 0.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 0.935467 0.000000 0.000000 0.000000 0.000000
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MA(5,50) BBRI TRUB BDMN ITMG Fraction of Return Generated From Buy Signal>Unconditional Basic Return From Bootstrapped Series BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI TRUB BDMN Fraction of Return Generated From Buy Signal>0 ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI TRUB Fraction of Return Generated From Sell Signal>Unconditional Basic Return From Actual Series BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 MA(5,150) 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 MA(5,200) 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.061600 1.000000 0.052000 1.000000 1.000000 1.000000 0.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 0.936800 1.000000 1.000000 1.000000 1.000000 1.000000 0.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000
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MA(5,50) BUMI TLKM ADRO ASII BBRI TRUB Fraction of Return Generated From Sell Signal>Unconditional Basic Return From Bootstrapped Series BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI TRUB BDMN Fraction of Return Generated From Sell Signal>0 ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO Fraction of Difference in Return Generated From Buy SignalReturn Generated From Sell Signal>Unconditional Basic Return From Actual Series ASII BBRI TRUB BDMN ITMG BBNI MIRA SGRO 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.276000 0.996000 0.924000 0.924000 1.000000 0.000000 1.000000 0.904000 1.000000 0.026000 0.02600000
MA(5,150) 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.334000 0.998000 0.960000 0.942000 1.000000 0.000000 1.000000 0.916000 1.000000 0.018000 0.02600000
MA(5,200) 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.133333 1.000000 1.000000 1.000000 1.000000 1.000000 0.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.00000000
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MA(5,50) Fraction of Difference in Return Generated From Buy SignalReturn Generated From Sell Signal>Unconditional Basic Return From Actual Series ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI Fraction of Difference in Return Generated From Buy SignalReturn Generated From Sell Signal>Unconditional Basic Return From Bootstrapped Series TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI TRUB Fraction of Difference in Return Generated From Buy SignalReturn Generated From Sell Signal>0 BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General 1.000000 1.000000 0.988000 1.000000 0.801733 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.300000 0.998000 0.938000 0.934000 1.000000 0.000000 1.000000 0.914000 1.000000 0.022000 0.030000 1.000000 1.000000 0.992000 1.000000 0.806000 MA(5,150) 1.000000 1.000000 1.000000 0.998000 0.811467 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.362000 0.998000 0.978000 0.956000 1.000000 0.000000 1.000000 0.932000 1.000000 0.016000 0.030000 1.000000 1.000000 1.000000 0.998000 0.815867 MA(5,200) 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000
First look of presented result of the application of these combined moving average rules to the bootstrapped series may be the generated mean return for generated buy signal. From the presentation for mean of return generated from
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buy signal, we can see that for MA(5,50) and MA(5,150), no positive mean return generated. While for MA(5,200), out of 15 stocks series tested, 14 of it shows a positive mean return result and only bootstrapped series of TLKM that resulted with negative mean return. The average value of mean return generated for MA(5,200) is positive which shows that the application of this moving average rules in general will also generate a positive return for investors. For mean return of generated sell signal, the condition is very much alike with the one in generated buy signal return. Whereas, none of the results from MA(5,50) and MA(5,150) shows a positivity with its mean return. But, for MA(5,200) all the resulted mean return for sell signal is positive, which at last also generate a positive average value of it with the value of 7.8478%. This circumstance once again strengthen the position of applying MA(5,200) to the other two tested rules. From this return from buy signal and return from sell signal, we may infer that with the application of MA(5,50) and MA5(150), the value of return generated from buy signal is somewhat higher than return generated from sell signal, It shows from a positive average value of buy-sell difference. The only negativity of this aspect appears only in 3 out of 15 stocks observed (BUMI, MIRA, and SGRO). While the other characteristic appears with the application of MA(5,200) to the bootstrapped series, in which the result of mean of difference between return generated from buy signal with return generated from sell signal all are negative. It shows under the employ of MA(5,200) to the bootstrapped series, all the resulted return from sell signal is higher than the buy signal. Premature conclusion that we may have from this finding is that the employ of such trading rule may more valuable for generating sell signal. From this presentation of mean return generated from buy signal, sell signal and the difference of two, we can say that the result is somehow consistent with the previous analysis under the use of moving average rules to the original series. This consistency is in how the rule MA(5,200) differs with MA(5,50) and MA(5,150). To provide a better understanding, in the result presentation we also present a fraction of resulted mean return in comparison with some specific parameters. As what brought by Brock, Le Baron, and Lakonishok (1992) in their
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seminal paper, this value of fraction may serve to calculate p value to support our choice of hypothesis. For the first look, the fraction of return generated buy signal that higher than the unconditional basic return in the original series. All the resulted return generated from buy signal from MA(5,50) and MA(5,150) shows no fraction value higher than 0. This shows us that for return generated by its buy signal, MA(5,50) and MA(5,150) is really outperformed, since no return of it subset the unconditional basic return from the original series. For MA(5,200) the condition is very much different, in which most of the resulted return from this buy signal have a fraction value 1. (14 stocks out of 15 stocks observed resulted a fraction value 1, while the other 1 stock resulted a fraction value 0.04). From this majority fraction value of 1, the general fraction value of employing MA(5,200) to the all the bootstrapped series also become somewhat high (0.93546). Treating this value to calculate p value, solely for MA(5,200), we can have the value of 0.064 (10.936), which is lower than 0.025 as the significance level. Hence, null hypothesis of return equality is rejected. Whilst, for MA(5,50) and MA(5,150), with fraction value as 0, the p value then become 1, which is bigger than 0.025 as significance level. Hence, the null hypothesis of return equality can be accepted. For the other fraction concept, the result of whether the fraction value support us to reject the null hypothesis of return equality or not, will be presented in the following table : Table 4.30. Summary of Result Over The Fraction Value to Hypothesis Conclusion
This table presents the summary of how the calculated fraction of value for each set of parameter (which further calculated become p value) effects the conclusion of which hypothesis to support. Shown here the hypothesis supported under specific stock and specific parameters.
Parameter BUMI TLKM Fraction of Buy>Actual Return - Test the equality of return from application of moving average rules with the unconditional mean return from the original series ADRO ASII BBRI TRUB BDMN ITMG BBNI MIRA MA(5,50) Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 MA(5,150) Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 MA(5,200) Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0
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Table 4.30. Summary of Result Over The Fraction Value to Hypothesis Conclusion (Continued)
Parameter Fraction of Buy>Actual Return - Test the equality of return from application of moving average rules with the unconditional mean return from the original series MA(5,50) SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII Fraction of Buy>Bootstrapped Return - Test the equality of return from application of moving average rules with the unconditional mean return from the bootstrapped series BBRI TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI Fraction of Buy>0 shows the equality of return from the application of moving average rules to zero (showing whether the rules tested have value or not). TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 MA(5,150) Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 MA(5,200) Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0
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Parameter BUMI TLKM ADRO ASII BBRI Fraction of Sell>Actual Return - Test the equality of return from application of moving average rules with the unconditional mean return from the original series TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII Fraction of Sell>Bootstrapped Return- Test the equality of return from application of moving average rules with the unconditional mean return from the bootstrapped series BBRI TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM Fraction of Sell>0 shows the equality of return from the application of moving average rules to zero (showing whether the rules tested have value or not). ADRO ASII BBRI TRUB BDMN ITMG BBNI MIRA SGRO ELSA MA(5,50) Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 MA(5,150) Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 MA(5,200) Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0
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Parameter INKP Fraction of RGSS>0 CTRA CTRP General BUMI TLKM ADRO ASII BBRI Fraction of Buy-Sell>Actual Return - Test the equality of return from application of moving average rules with the unconditional mean return from the original series TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI Fraction of BuySell>Bootstrapped Return Test the equality of return from application of moving average rules with the unconditional mean return from the bootstrapped series TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI Fraction of Buy-Sell>0 shows the equality of return from the application of moving average rules to zero (showing whether the rules tested have value or not). TLKM ADRO ASII BBRI TRUB BDMN
MA(5,50) Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0
MA(5,150) Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0
MA(5,200) Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0
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Parameter ITMG BBNI Fraction of Buy-Sell>0 - shows the equality of return from the application of moving average rules to zero (showing whether the rules tested have value or not). MIRA SGRO ELSA INKP CTRA CTRP General MA(5,50) Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 MA(5,150) Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 MA(5,200) Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0
By the presentation in Table 4.30. we can see that most result of hypotheses is not to reject the null hypothesis of return equality. This condition of not rejecting the null hypothesis for two-tailed test at 95% degree of confidence apply for most of the return generated from buy signal, return generated from sell signal, and the difference of two. For return generated from buy signal, comparing the return with the unconditional basic return from original series, unconditional basic return from bootstrapped series, and zero value, all recommends not to reject the null hypothesis for all tested combined moving average rules. Several conditions that result a rejection of null hypothesis only seen for partial application of MA(5,200) in some stocks, but when it comes to general application to all observed stock the result is still not to reject the null hypothesis. From the employ of combined moving average rules, for return generated from buy signal, it also shows that return generated from buy signals is no different than zero. Since the resulted p value across MA(5,50), MA(5,150), and MA(5,200), all are larger than 0.025 (as the fraction value all are 0, which cause the p value becomes 1). Further for the generation of conclusion for return generated from sell signal, there is some differences in the resulted hypothesis throughout the examined combined moving average rules. For MA(5,50) and MA(5,150), all the resulted hypotheses are not to reject the null hypothesis of return equality in comparison of return generated from sell signal with unconditional basic return
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from actual series, bootstrapped series and 0. Whilst, the circumstance do not apply for the application of MA(5,200) to the bootstrapped series. The result of hypothesis for comparison of return generated from sell signal with the unconditional basic return from actual series is to reject the null hypothesis of return equality. This means that the return resulted from sell signal with the employ of MA(5,200) is not equal to unconditional basic return at 5% significance level. However, this value inequality still need to evaluated further to test whether the return generated from sell signal outperforms the unconditional basic return from actual series, which means that this MA(5,200) really have value in generating sell signal. This resulted hypothesis of return comparison between return generated from sell signal with unconditional basic return from actual series is not consistent with the comparison with unconditional basic return from bootstrapped series. In which, under this comparison, the resulted hypothesis is not to reject the null hypothesis of return equality. This means, by assuming the bootstrapped series as an original series , the employ of MA(5,200) will generate return for sell signal that is no difference in term of value with the unconditional basic return from the bootstrapped series. Meanwhile, with the comparison of return generated from sell signal with zero value, the resulted hypotheses for MA(5,50) and MA(5,150) support the hypothesis of return equality with zero. This consistent with the previous conclusion that MA(5,50) and MA(5,150) generates no significant value at 5% significance level. However, once again, anomaly exist for MA(5,200) in which this rule results a conclusion to reject the hypothesis of return equality with zero. By this result, we can say from the observed combined moving average rules tested, MA(5,200) is the one that generates value for investors. For the result of conclusion to available hypotheses for the difference of return generated from buy signal and return generated from sell signal, there is several drift in result for the stocks observed partially. However, when the test is re-done for the overall bootstrapped stock series observed, the result is not reject the null hypothesis of return equality, both with the unconditional basic return from actual series, unconditional basic return from bootstrapped series and zero
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value. In this case the employ of combined moving average rules tested generate no value for investors in term of difference between return generated from buy signal and return generated from sell signal. Following the result from Table 4.30, we can see from overall aspect and tested rules of combined moving average, MA(5,200) is the only rule that results a rejection of null hypothesis results. Although this result only persists for comparison in return generated from sell signal with unconditional basic return from actual series and zero value, this condition already showing that this particular return providing value for investors while applied. And still this partial result that supporting hypothesis is the most crucial one, because it is compared with the unconditional basic return from actual series and the zero value. This two parameter of comparison can be said as the most basic and generic form of parameter that actually exist and not coming from the simulation. To provide a better analysis regarding the value difference of this MA(5,200) with zero value and the unconditional basic return from actual series, the author conduct a mean comparison analysis which is summarized in the following table : Table 4.31. Mean Comparison of Mean Of Return Generated From Sell Signal With Mean of Unconditional Basic Return in Actual Series and Zero Value
Mean of RGSS BUMI TLKM ADRO ASII BBRI TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General 0.217480369 0.008245281 0.053038012 0.088908282 0.029911031 0.165187632 0.029911031 0.087055945 0.101864807 0.027735482 0.035303449 0.104038632 0.056746447 0.079767457 0.091979183 0.078478203 0.000122932 0 Mean of UBR from Actual Series Zero Value
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Table 4.31. Mean Comparison of Mean Of Return Generated From Sell Signal With Mean of Unconditional Basic Return in Actual Series and Zero Value (Continued)
Attributes
Comparison of Mean From RGSS With Mean of UBR from Actual Series BUMI TLKM ADRO ASII BBRI TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher
Comparison of Mean From RGSS With Zero Value Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher Higher
From Table 4.31. we can see how the return inequality between the return generated from sell signal and unconditional basic return from actual series and also zero value exists. For this analysis, we compare the mean of each subset data to obtain a conclusion generalization. And by this process, we obtain that for all stocks observed partially and also for the general condition, in which the run done simultaneously, all the resulted mean of return generated from sell signal is greater than the mean of unconditional basic return from actual series and also from zero value. By this higher value of mean, we may take a conclusion upon the next hypothesis, in which then we should reject the null hypothesis stating that the return from the application of moving average rule, in this case return generated
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from sell signal under MA(2,200), is no greater than the paired value observed, in this case is the unconditional basic return from actual series and zero value. After having the combined moving average rules analyzed, the next part of applying bootstrap methodology should also work for analyzing simple moving average rules. The results of application of simple moving average rules to the bootstrapped series are as follow : Table 4.32. Result of The Application of Simple Moving Average Rules To The Bootstrapped Series
The original data series is re-sampled with replacement in order following the concept of bootstrap simulation. Then the moving average rules are employed to this series. The Buy aspect presents the mean return generated for buy signal, and Sell aspect presents the mean return generated for sell signal. Buy-Sell aspect is simply the mean return of difference between Buy and Sell. Fraction of Buy>Actual Return presents the value of fraction of specified aspect (buy), which generates a higher value than unconditional mean return in the actual series. Fraction of Buy>Bootstrapped Return presents the value of fraction of specified aspect (buy), which generates a higher value than unconditional mean return in the bootstrapped series. Fraction of Buy>0 presents the value of fraction of specified aspect (buy), which generates a higher value than 0. For other aspect (sell and buy-sell) it follows.
SMA(1,15) BUMI TLKM ADRO ASII BBRI TRUB BDMN Mean of RGBS ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM Mean of RGSS ADRO ASII BBRI TRUB 0.5173454 0.0050002 0.1869243 0.2812685 0.1353316 0.0650638 0.1646255 0.2725685 0.3063428 0.1265632 0.1501989 0.2969442 0.2105295 0.2454859 0.2736036 0.2158531 0.1130059 (0.0108929) 0.0876139 0.1124269 0.0795638 0.0384844 SMA(1,10) 0.5216237 0.0633559 0.1892193 0.2835243 0.1364658 0.0651487 0.1654611 0.2749535 0.3075563 0.1287746 0.1524910 0.2981106 0.2107516 0.2488875 0.2770639 0.2215592 0.1173055 0.0474643 0.0899083 0.1146907 0.0806972 0.0385696 SMA(1,5) 0.5375894 0.0660915 0.1969170 0.2912276 0.1405068 0.0653884 0.1691187 0.2831967 0.3137340 0.1354663 0.1595697 0.3051936 0.2131696 0.2590497 0.2872698 0.2282326 0.1332713 0.0502000 0.0976060 0.1223940 0.0847382 0.0388093
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Table 4.32. Result of The Application of Simple Moving Average Rules To The Bootstrapped Series (Continued)
SMA(1,15) BDMN ITMG BBNI MIRA Mean of RGSS SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI TRUB BDMN Mean of RGBS-RGSS ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI TRUB Fraction of Return Generated From Buy Signal>Unconditional Basic Return From Actual Series BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General 0.0898350 0.1079222 0.1187823 0.0718506 0.0803165 0.1114021 0.1060286 0.0970527 0.1034387 0.0871221 0.4043395 0.0158931 0.0993104 0.1688416 0.0557678 0.0265794 0.0747905 0.1646463 0.1875605 0.0547126 0.0698824 0.1855421 0.1045009 0.1484332 0.1701649 0.1287310 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000
SMA(1,10) 0.0906666 0.1102999 0.1199902 0.0740599 0.0826106 0.1125618 0.1062544 0.1004448 0.1068971 0.0928281 0.4043181 0.0158915 0.0993110 0.1688335 0.0557686 0.0265791 0.0747945 0.1646536 0.1875661 0.0547147 0.0698804 0.1855488 0.1044972 0.1484427 0.1701668 0.1287311 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000
SMA(1,5) 0.0943243 0.1185431 0.1261679 0.0807516 0.0896893 0.1196447 0.1086724 0.1106070 0.1171030 0.0995015 0.4043181 0.0158915 0.0993110 0.1688335 0.0557686 0.0265791 0.0747945 0.1646536 0.1875661 0.0547147 0.0698804 0.1855507 0.1044972 0.1484427 0.1701668 0.1287312 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000
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SMA(1,15) BUMI TLKM ADRO ASII BBRI Fraction of Return Generated From Buy Signal>Unconditional Basic Return From Bootstrapped Series TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI TRUB BDMN Fraction of Return Generated From Buy Signal>0 ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM Fraction of Return Generated From Sell Signal>Unconditional Basic Return From Actual Series ADRO ASII BBRI TRUB BDMN ITMG 1.0000000 0.0000000 1.0000000 1.0000000 1.0000000 0.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.8026667 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.0000000 0.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 SMA(1,10) 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.8162667 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 SMA(1,5) 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.8665333 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.1600000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000
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SMA(1,15) BBNI MIRA Fraction of Return Generated From Sell Signal>Unconditional Basic Return From Actual Series SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI Fraction of Return Generated From Sell Signal>Unconditional Basic Return From Bootstrapped Series TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI TRUB BDMN Fraction of Return Generated From Sell Signal>0 ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.9333333 0.0000000 0.0000000 1.0000000 0.0000000 1.0000000 0.0000000 1.0000000 0.0000000 0.0000000 1.0000000 1.0000000 0.0000000 0.8360000 0.0000000 0.0000000 0.0000000 1.0000000 0.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.9333333
SMA(1,10) 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.0000000 1.0000000 1.0000000 0.0000000 1.0000000 0.0000000 1.0000000 0.0000000 0.0000000 1.0000000 1.0000000 0.0000000 0.8840000 0.0000000 0.0000000 0.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000
SMA(1,5) 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.0000000 1.0000000 1.0000000 0.0000000 1.0000000 0.0000000 1.0000000 0.0000000 0.0000000 1.0000000 1.0000000 0.0000000 1.0000000 0.0000000 0.0000000 0.0588000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000
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SMA(1,15) BUMI TLKM ADRO ASII BBRI Fraction of Difference in Return Generated From Buy Signal-Return Generated From Sell Signal>Unconditional Basic Return From Actual Series TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI Fraction of Difference in Return Generated From Buy Signal-Return Generated From Sell Signal>Unconditional Basic Return From Bootstrapped Series TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI Fraction of Difference in Return Generated From Buy Signal-Return Generated From Sell Signal>0 TLKM ADRO ASII BBRI TRUB BDMN 1.0000000 1.0000000 0.5140000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.4860000 0.5040000 1.0000000 0.5000000 0.4640000 0.0000000 1.0000000 0.5320000 0.5000000 0.5400000 0.4940000 0.4960000 0.4720000 0.4560000 0.5100000 0.4666667 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 SMA(1,10) 1.0000000 1.0000000 0.5160000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.4840000 0.5000000 1.0000000 0.5020000 0.4580000 0.0000000 1.0000000 0.5240000 0.5040000 0.5440000 0.4900000 0.4920000 0.4720000 0.4600000 0.5120000 0.4666667 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 SMA(1,5) 1.0000000 1.0000000 0.5160000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 0.4840000 0.5000000 1.0000000 0.5020000 0.4580000 0.0000000 1.0000000 0.5240000 0.5040000 0.5440000 0.4900000 0.4929860 0.4720000 0.4600000 0.5120000 0.4665955 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000
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SMA(1,15) ITMG BBNI Fraction of Difference in Return Generated From Buy Signal-Return Generated From Sell Signal>0 MIRA SGRO ELSA INKP CTRA CTRP General 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000
SMA(1,10) 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000
SMA(1,5) 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.0000000
From the presentation in Table 4.32., we may see that the means of return generated from buy signal resulted from simple moving average tested, are all positive. And from the general result, it can be seen that the simple moving average tested that generates the highest mean of return generated from buy signal is MA(5,10) (while the one that generates the lowest mean of return from buy signal is MA(5,15)). For return generated from sell signal , the only negative value appears on mean of return generated from sell signal of applying simple moving average SMA(5,15) partially to the bootstrapped series of TLKM. While for the other results are all positive. However the partial result for TLKM is, the general results for mean of return generated from sell signal from applying SMA(5,5), SMA(5,10), and SMA(5,15) are all positive. For mean of difference between return generated from buy signal and return generated from sell signal, the result after applying the simple moving average rules tested all are negative. This negative values are all around -12.9%. The result in Table 4.32. also shows us the number of fraction of several parameters comparing the mean of return generated from buy signal, the mean of return generated from sell signal and the difference of two with the unconditional basic return from original series, unconditional basic return from bootstrapped series, and zero value. As the result of fraction values in Table 4.29, this fraction value results in Table 4.32. will also treated to generate a p value that may lead
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the conclusions of this study toward the null hypothesis of return equality among the compared series. Having the fraction values in Table IV.32 treated, we may have results of p value presented in the following table :
Table 4.33. Summary of Result Over The Fraction Value to Hypothesis Conclusion For Application of Simple Moving Average Rules
This table presents the summary of how the calculated fraction of value for each set of parameter for the application of simple moving average rules to the bootstrapped series (which further calculated become p value) effects the conclusion of which hypothesis to support. Shown here the hypothesis supported under specific stock and specific parameters.
Parameter BUMI TLKM ADRO ASII BBRI Fraction of Buy>Actual Return - Test the equality of return from application of moving average rules with the unconditional mean return from the original series TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI Fraction of Buy>Bootstrapped Return Test the equality of return from application of moving average rules with the unconditional mean return from the bootstrapped series TLKM ADRO ASII BBRI TRUB BDMN ITMG BBNI SMA(15) Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 SMA(10) Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 SMA(5) Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0
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Table 4.33. Summary of Result Over The Fraction Value to Hypothesis Conclusion For Application of Simple Moving Average Rules (Continued)
Parameter MIRA Fraction of Buy>Bootstrapped Return Test the equality of return from application of moving average rules with the unconditional mean return from the bootstrapped series SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI Fraction of Buy>0 - shows the equality of return from the application of moving average rules to zero (showing whether the rules tested have value or not). TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI Fraction of Sell>Actual Return - Test the equality of return from application of moving average rules with the unconditional mean return from the original series TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General SMA(15) Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 SMA(10) Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 SMA(5) Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0
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Parameter BUMI TLKM ADRO ASII Fraction of Sell>Bootstrapped Return- Test the equality of return from application of moving average rules with the unconditional mean return from the bootstrapped series BBRI TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII Fraction of Sell>0 shows the equality of return from the application of moving average rules to zero (showing whether the rules tested have value or not). BBRI TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI Fraction of BuySell>Actual Return Test the equality of return from application of moving average rules with the unconditional mean return from the original series TLKM ADRO ASII BBRI TRUB BDMN ITMG BBNI SMA(15) Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 SMA(10) Not Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 SMA(5) Not Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0
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Parameter Fraction of BuySell>Actual Return - Test the equality of return from application of moving average rules with the unconditional mean return from the original series MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII Fraction of BuySell>Bootstrapped Return - Test the equality of return from application of moving average rules with the unconditional mean return from the bootstrapped series BBRI TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General BUMI TLKM ADRO ASII BBRI Fraction of Buy-Sell>0 shows the equality of return from the application of moving average rules to zero (showing whether the rules tested have value or not). TRUB BDMN ITMG BBNI MIRA SGRO ELSA INKP CTRA CTRP General SMA(15) Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 SMA(10) Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 SMA(5) Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0 Reject H0
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From taking the resulted p value to construct the conclusion of hypothesis, we can see from Table 4.33. that the result of employing simple moving average rules to the bootstrapped series is not the same with combined moving average rules. We can see from Table 4.33. that the result of not to reject of null hypothesis of return equality with the comparing parentheses only exists with comparison between return generated from buy signal, sell signal and the difference of two with unconditional basic return from bootstrapped series. This is shown, while taking the assumption of bootstrapped condition as a general condition, the simple moving average rules applied also create no value for investors in compared with the unconditional basic return. But when it comes to comparison with the null value, different with the combined moving average result, application of simple moving average mostly shows a result to reject the null hypothesis. This shows us that the return resulting from simple moving average is not zero, and since it is taken from fraction value of mean return greater than zero, the conclusion is most simple moving average results a return greater than zero. The only exception exists for return generated from sell signal from SMA(1,5) which results not to reject the null hypothesis. Early conclusion that may be taken from this result is that SMA(1,15) is the least profitable simple moving average rules in compare with the other two tested. For comparison with the unconditional basic return from original series, return generated from the application of simple moving average rules in this bootstrapped series (whether for buy signal, sell signal, and the difference of two), all generates a result to reject the null hypothesis. This term may lead us to a conclusion that the moving average rules tested have value. However, since the very basic aim of this study is to provide a deepened for a general condition, the comparison that much more suitable to lead us a conclusion is still the one with unconditional basic return from bootstrapped series. 4.5. Further Analysis Employing bootstrap methodology to the observed stock price series provide us a better understanding over the real value of applying moving average
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rules to the observed series. As mention in the previous part of this study, which the employ of bootstrap in this study enable us to get a better perspective about the study for not only within the observed data under the time framework. The result that already presented and analyzed under this bootstrap already shows us the value of applying moving average rules tested over a general condition (not only for the year of 2009). And from the result we can see that most of the tested moving average rules provide no value for investor, since this rules not really provide a return for investors that differs from unconditional basic return from the original series, unconditional basic return from bootstrapped series and even not really differs from zero. The difference only appear from applying the combined moving average rule MA(5,200). From the results, we can see that MA(5,200) provide a value that differs from unconditional basic return from original series, and zero if investors following the sell signal it generates. Even, from the result we obtain a conclusion to reject the null hypothesis, in which the return generated by applying this rule is bigger than unconditional basic return from original series that means it provides a better value for investors. However, if we assume the real unconditional return that should be taken into comparison is the unconditional basic return from bootstrapped series, employing this MA(5,200) will still provide no value for investors. Of course, the most suitable parameter to make is by taking the unconditional basic return from bootstrapped return as the parameter of comparison. Since the best way to get a general perspective over the value of tested moving average rules, not a perspective that follows only for the observed year 2009, is to make a full parentheses that occur under the bootstrapped series. Employing this, the MA(5,200) still provides no value for investors even when they follow it for the sell signal generated. For the result of applying simple moving average rules to the bootstrapped series show us quite a same result when it comes to a comparison with the unconditional basic return from the bootstrapped series. The result shows us that the return generated from tested simple moving average rules create no outstanding return for investor other than the unconditional basic return itself.
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In conclusion, we can say that all the observed moving average rules in this study provide no value for investors. So employing this rules will not make investors experiencing an outstanding return other than the unconditional basic return. These findings are consistent with the findings brought by Marshall, Cahan and Cahan (2006) in their seminal paper observing the technical trading rules for intraday stock trading in US Stock Market. But it still contrasts with the first paper employing bootstrap methodology for assessing value of technical trading rules brought by Brock, Le Baron and Lakonishok (1992). The findings brought by Brock, Le Baron and Lakonishok (1992) shows that employing moving average rules at some part will still provide value for investors. But this condition may differs than this study and the one brought by Marshall, Cahan and Cahan (2006) since Borck, Le Baron and Lakonishok (1992) assessing the use of technical trading rules general stock trading concerning general stock trading with daily stock return as the comparing value. While this study and the one brought by Marshall, Cahan and Cahan (2006) focusing on the use of technical trading rules for intraday stock trading. Other condition that may lead to result difference is the stock observed in which stock market it is listed. Since stock market efficiency really related with the value observed. By this conclusion of the value of employing moving average rules, investors in Indonesia should reconsider the use of moving average rules in their investment decision. Especially when it comes to real practical world when transaction cost is taken into account, of course this value of return generated from moving average rules that is not so differs from the unconditional basic return will be further deducted by the transaction cost. In conjunction with the efficient market hypothesis, this non-valuable return generated from moving average rules lead to a conclusion of condition that stock market in Indonesia is efficient in a weak form. Since, the use of historical data price in form of moving average trading rule cannot provide an outstanding return for investors. This is one proof supporting that the historical prices already reflected in todays price, so employing these historical data will not giving any extra benefit for investors.
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However, this study is not focusing on assessing whether stock market in Indonesia is efficient or not. We can only relate the findings in this study to our perspective over the efficiency of stock market in Indonesia. Since, the findings over the non performing moving average rules in generating value for investors is not the sole characteristics in determining stock market efficiency. 4.6.Analysis of Signal Generated From Observed Moving Average Rules The result of this study may also lead us to another perspective over the use of moving average rules in generating signals for investor. The process of bootstrapped simulation in this study can be used as an observation whether the observed moving average rules really generate an equal number of signals, both for sell and buy. Following the study by Brock, Le Baron, and Lakonishok (1992) in their seminal paper, technical trading rules should be objective and generating a sell signal as much as buy signal over a general condition, in this case under bootstrapped. To obtain a perspective over this concept brought by Brock, Le Baron and Lakonishok, we also collect the number of signal generated in each bootstrap method. And the summary of the result of this process presented in the following table :
Table 4.34. Summary of Mean Value of Signal Generated for Each Rule
This table presents us a summary of mean value of number of signals generated for each rule under the bootstrap simulation. This table divided into two parts, where the first part presents us the simple moving average rules, and the second part presents us the result with combined moving average rules.
SMA(1,15) Buy ADRO ASII BBNI BBRI BDMN BUMI 3642.2 3689.7 2991.0 3360.5 3120.8 3502.0 Sell 4298.8 4187.3 4918.0 4548.5 4788.2 4468.0 SMA(1,10) Buy 3683.6 3691.1 3062.4 3396.8 3152.1 3555.0 Sell 4262.4 4190.9 4851.6 4517.2 4761.9 4420.0 SMA(1,5) Buy 3794.0 3719.8 3270.8 3521.8 3332.6 3688.0 Sell 4152.0 4162.2 4643.2 4392.2 4581.4 4287.0
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Table 4.34. Summary of Mean Value of Signal Generated for Each Rule (Continued)
SMA(1,15) Buy CTRA CTRP ELSA INKP ITMG MIRA SGRO TLKM TRUB Total 3794.0 3489.0 2641.0 2741.0 3499.0 4173.0 4165.0 5396.0 6863.0 57067.2 Buy ADRO ASII BBNI BBRI BDMN BUMI CTRA CTRP ELSA INKP ITMG MIRA SGRO TLKM TRUB Total 821.3 813.2 779.8 806.3 806.3 806.3 816.2 806.4 757.1 748.5 814.8 806.5 818.4 812.3 800.3 12013.8 Sell 4179.0 4420.0 5300.0 5168.0 4442.0 3672.0 3744.0 2513.0 1046.0 61692.8 Sell 821.3 813.2 779.9 806.2 806.2 806.2 816.1 806.4 757.0 748.4 814.8 806.5 818.4 812.3 800.3 12013.1 SMA(1,10) Buy 3777.0 3497.0 2747.0 2814.0 3550.0 4148.0 4104.0 3820.0 6847.0 55844.9 Buy 805.4 795.2 755.8 790.1 790.1 790.1 799.5 788.5 733.0 723.0 796.1 793.0 802.4 797.7 778.4 11738.1 Sell 4201.0 4417.0 5199.0 5100.0 4396.0 3702.0 3810.0 4094.0 1067.0 62990.1 Sell 805.4 795.2 755.8 790.0 790.0 790.0 799.5 788.5 733.0 723.0 796.1 793.1 802.3 797.6 778.4 11738.0 SMA(1,5) Buy 3808.0 3546.0 3083.0 3228.0 3665.0 4092.0 4075.0 3806.0 6820.0 57450.0 Buy 258.7 254.0 244.3 253.7 253.7 253.7 256.3 253.2 236.2 233.0 254.7 253.1 258.2 255.9 250.1 3769.0 Sell 4170.0 4368.0 4863.0 4686.0 4281.0 3758.0 3839.0 4108.0 1094.0 61385.0 Sell 258.7 254.1 244.3 253.7 253.7 253.7 256.3 253.1 236.3 233.0 254.7 253.0 258.1 255.9 250.2 3768.7
MA(5,50)
MA(5,150)
MA(5,200)
From this result, we then conduct a t test of equality to test whether the value resulted is the same between buy and sell. The t test used to show this number of signals equality is a two tailed test, with 95% degree of confidence. The summary of resulted t test is presented in the following table :
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Table 4.35. Result of t Test for Equality of Signals Generated Between Buy and Sell
This table presents us the result of t test for equality of signals generated between buy and sell signal. The t test conducted is a two tailed test with 95% degree of confidence. This table presents us the p value in the second column and the hypothesis following it in the next column.
p Value SMA(1,15) SMA(1,10) SMA(1,5) MA(5,50) MA(5,150) MA(5,200) 0.589640069 0.353449427 0.572959537 0.070623841 0.61759025 0.135452422 Hypothesis Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0 Not Reject H0
Following the result from Table 4.35, we can see that the number of signals generated by each moving average rules are both the same for buy and sell signal. This is the conclusion we may obtain as all the tests generate a result not to reject the null hypothesis of equality between generated buy and sell signal.
CHAPTER 5 CONCLUSION & RECOMMENDATION
5.1. Conclusion From this study observing several moving average rules, which is the simple moving average rules and combined moving average rules, we may obtain several conclusion both for the original series and for the general condition of employing the rules. For employing the moving average rules to the original data series, the conclusions we may obtain are as follow : a. The use of simple moving average rules to original data series providing investors with mean of return that is different than the unconditional basic return from the original series. All the tested rules of SMA(1,5), SMA(1,10), SMA(1,15) generate a result to reject the null hypothesis of return equality with unconditional basic return from original series under a two tailed test 5% significance level. Further analysis of mean return comparison also shows that applying the simple moving average rules generate a mean return that is higher than the unconditional basic return. However, this conclusion only persist for the data series in year 2009. b. The use of combined moving average rules to original data series providing investors with mean of return that is different than the unconditional basic return from the original series. Tested MA(5,50), MA(5,150), and MA(5,200) providing us a result to reject the null hypothesis of return equality with unconditional basic return from original series under a two tailed test 5% significance level. However this return inequality in return from combined moving average rules stands for lower return resulted from combined moving average rules, in comparison with unconditional basic return. While in order to generate a conclusion that more general, we conduct the bootstrap methodology that provides us a perspective over the value of employing
95
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moving average rule not only for year 2009. The conclusions we may obtain with this bootstrap methodology employed are as follow : a. None of the simple moving average rules tested generate a value that differs from the unconditional basic return from original series, unconditional basic return from bootstrapped series, and zero. This conclusion is obtained with a two tailed test, 5% significance level. b. For the combined moving average rules, all returns generated from MA(5,50) and MA(5,150) are no different from the unconditional basic return from original series, unconditional basic return from bootstrapped series, and zero. This conclusion is obtained with a two tailed test, 5% significance level. c. The only difference for the tested combined moving average rules appear for MA(5,200). In which by the use of two tailed 5% significance level the return generated from sell signal under MA(5,200) is not equal to unconditional basic return from original series and zero. Further analysis providing us a better look that this moving average rule generates a higher return for investor than the unconditional basic return in the original series. d. However, as a good echo to echo comparison, we take the value of return generated from bootstrapped series as comparing value. By this comparison, we can see that no single combined moving average rules tested really providing value for investors. e. For tested simple moving average rules, we found that all the result from applying simple moving average rules to the bootstrapped series generate a mean return that is higher than the unconditional basic return from original series (resulted by conclusion to reject null hypothesis). f. Comparison of return generated from application of simple moving average rules with zero value shown a result that mostly reject null hypothesis, showing the return generated contains value greater than zero. The only exception exists for return generated from sell signal
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for MA(1,15) which shows a conclusion not to reject the null hypothesis of return equality with zero. g. Taking the comparison with unconditional basic return from bootstrapped series as the parentheses, all results of return generated from application of simple moving average conclude not to reject the null hypothesis of return equality. Following several points that already described above, we may take into a general conclusion that all the moving average technical trading rules tested under this study provide no extraordinary value for investors. The basic point that leads us to this conclusion is mainly the result of hypothesis by comparing with the return generated from bootstrapped series as the parentheses. Since this study aim to provide a value diagnosis over a general condition and time, a comparison with unconditional basic return would be the best parameter to lead our conclusion. This study also able to show that the signals generated from observed moving average rules are the same in term of number, between buy and sell signal. So the observed moving average rule does not have any tendency to generate a particular signal more than others. 5.2. Recommendation As the first chapter of this study, we also provide several recommendations for parties that may have stake to the findings resulted from this study. Those recommendations are : a. For Academician By this findings of no value of employing moving average rules, academician will have to provide a better look over this moving average rules. Academician will have to conduct a future research with other method, concerning which type of moving average rules that may really provide a value for investors. Academician in the future should also develop a better relation of moving average and any other technical trading rules with available market theory so it no longer being an anathema to the academic world.
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The partial result of this study also shows academician that employing moving average rules, which is one form of technical trading rules, not always useless. b. For Investors and Market Participants By the value found under this study of the observed moving average rules, investors in the future should rethink about solely rely their investment decision on such rules. Investors should also further research other well known technical trading rules, so a greater perspective over this method of generating investment decision will be obtained. 5.3. Suggestion For Future Research To provide a better look upon moving average trading rules solely, there should be a future research that testing other type of moving average. So a broader perspective over the value of all know moving average can be obtained. Researcher should also conduct the effective lag price to be employed in generating trading signal, so there will be an effective moving average rule to be employed in the market. This type of future research also needs to be done for other type of technical trading rules, other than moving average. Since moving average is not the only technical trading rules that heavily used by market participants.
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REFERENCES
Allen, Franklin and Risto Karjalainen . 1998. Using genetic algorithms to find technical trading rules. Journal of Financial Economics, 51, pp. 245 271. Alexander, S.S. 1961. Price Movements in Speculative Market : Trends or Random Walks. Industrial Management Review, 2. pp. 7 -26. Burton Malkiel, A Random Walk Down Wall Street, W. W. Norton & Company (April 2003) p. 168. Brock, William, Josef Lakonishok and Blake Lebaron. 1992. "Simple Technical Trading Rules and the Stochastic Properties of Stock Returns," The Journal of Finance, 47(5), pp. 17311764. Brooks, Chris. 2005. Introductory Econometrics for Finance. United Kingdom: Cambridge University Press. Bodie, Zvi., Alex Kane, and Alan J, Markus. 2007. Essential of Investment. New York: McGraw-Hill. Efron, B, 1979, Bootstrap Methods : Another Look At The Jackknife, The Annals of Statistics 7, 1 - 26 Elton, Edwin J., et al. (2007). Modern Portfolio Theory and Investment Analysis 7th edition. United States of America: Wiley. Fama, Eugene. F. 1970. Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance 25 No. Fuadi, Kholid. 2007. Analisis Teknikal di Pasar Modal Indonesia. Undergraduate Thesis From PFE UGM. Gartley, H.M.. 1935. Profits in The Stock Market, Lambert Gann Publishing. Pomeroy, Washington.
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Gujarati, Damodar N. 2003. Basic Econometrics 4th edition. Singapura: McGraw Hill Husnan, Suad. 2009. Dasar-Dasar Teori Portofolio dan Analisis Sekuritas. Yogyakarta: Unit Penerbit dan Percetakan STIM YKPN. IDX Statistics 2009. Research Department Indonesia Stock Exchange. December 2009, pp. 26. Lui, Y., Mole, D..1998. The Use of Fundamental and Technical Analysis By Foreign Exchange Dealers : Hong Kong Evidence. Journal of International Money and Finance, 17. pp. 535 545. Marshall, Ben.R., Rochester H. Cahan and Jared M. Cahan . 2006. Does Intraday Technical Analysis in the U.S. Equity Market Have Value?, Journal of Empirical Finance, 15, pp. 199 - 210 Mekanisme Perdagangan BEI (2007). E-Library Universitas Gunadarma. Adobe PDF Document http://elearning.gunadarma.ac.id/docmodul/ perkembangan_pasar_modal/BAB%202.%20MEKANISME%20PERDA GANGAN%20BEI.pdf. Oberlechner, Tomas. 2001 Importance of Technical and Fundamental Analysis in the European Foreign Exchange Market. International Journal of Finance and Economics, Vol 6. pp. 81 93. Reilly, Frank K., Brown, Keith C. 2006. Investment Analysis and Portfolio Management 8th Edition. Canada: Thomson South-Western. Rubin, David S., Richard I. Levin. 1991. Statistics For Management 5/e . New Jersey : Prentice Hall. Sullivan, R., Timmerman, H., White,H.. 1999. Data Snooping, Technical Trading Rule Performance and The Bootstrap. The Journal of Finance, 245. pp. 1647 1691.
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UNIVERSITAS INDONESIA

ARIO HARSANTO 0606082182

HALAMAN PERNYATAAN ORISINALITAS

Nama NPM Tanda Tangan

: Ario Harsanto : 0606082182 :

: Depok : Juli 2010

CHAPTER 2 LITERATURE REVIEW

Stocks Listed in Indonesia Stock Exchange Year 2009

Trading Value Analysis (Based on IDX Statistic)

5 Highest Stock in Term of Trading Value

5 Middle Stock in Term of Trading Value (Around The Median)

5 Lowest Stock in Term of Trading Value

Stock Data That Will Be Used For The Study

Stock Data That Will Not Be Used For The Study

Figure 3.1. Scheme of Data Extraction for The Study

Table 3.1. List of Stocks Employed Under The Study

Figure 3.2. Illustration of Return Analyzed Under This Study

Observed Intraday Stock Prices Data

Applying Moving Average Trading Rules

Computation of Unconditional Basic Return

Return From Application of Moving Average

Unconditional Basic Return

Applying Moving Average Trading Rules

Computation of Unconditional Basic Return

Return From Application of Moving Average

Unconditional Basic Return From Bootstrapped Series

Figure 3.3. Illustration of Research Process Under This Study

CHAPTER 4 ANALYSES, RESULTS, AND DISCUSSIONS

Source : Authors Explication

Source : Authors Explication

N(Buy) 4066 4279 4786 135 69 3

N(Sell) 3904 3696 3194 133 68 3

Source : Authors explication

N(Buy) 4075 4224 4908 155 87 10

N(Sell) 3866 3722 3043 150 88 10

Source : Authors explication

N(Buy) 4123 4322 4867 163 96 3

N(Sell) 3818 3624 3084 168 95 3

Source : Authors explication

N(Buy) 3840 3925 4242 126 63 4

N(Sell) 4037 3957 3645 123 62 4

Source : Authors explication

N(Buy) 4003 4148 4619 137 80 8

N(Sell) 3906 3766 3300 142 81 7

Source : Authors explication

Source : Authors explication

N(Buy) 5319 5368 5637 106 61 5

N(Sell) 2591 2547 2283 105 62 6

Source : Authors explication

N(Buy) 4091 4213 4745 145 83 11

N(Sell) 3818 3701 3174 148 82 10

Source : Authors explication

N(Buy) 3942 4105 4454 148 79 5

N(Sell) 3999 3841 3497 146 77 4

Source : Authors explication

N(Buy) 4020 4267 4959 144 85 8

N(Sell) 3889 3647 2960 139 84 7

Source : Authors explication

N(Buy) 4857 5175 5756 166 91 2

N(Sell) 2988 2675 2099 163 92 3

Source : Authors explication

N(Buy) 4445.80 4695.40 5110.20 141.80 79.80 39.40 2418.73

N(Sell) 3457.00 3213.40 2802.60 140.20 79.40 6.00 1616.43