Profitability of technical trading rules in the Chinese stock market

This article examines the profitability of technical analysis on the Shanghai Stock Exchange Composite Index (SSEC) and the Growth Enterprise Market (GEM) Index, employing stepwise generalized error rate control procedures to address the data-snooping bias. Our comprehensive study encompasses 38,456 trading rules, extending beyond prior research by incorporating simple rules alongside their contrarian and complex counterparts. Upon rectifying data-snooping bias, we show that only a few complex rules outperform SSEC in different testing sub-periods, and no trading rules outperform GEM. As the outperforming rules are based on relatively high frequent trades, most lucrative rules yield negative returns in the out-of-sample periods once transaction costs were considered. Our new findings shed light on the efficiency of the Chinese stock market from 2010 to 2021.