Short-term Technical Predictive Ability in the Taipei Stock Market

Abstract

Based on the principle of supply and demand, the rules of marginal change, the hypothesis of log-normal distribution, and the two-dimensional rules of performance evaluation, an effective WINDEX can be created to determine the momentum behind the price or index movement. Accordingly, by using the Taipei stock market as an example, not only a simple bounded WINDEX approach can be practiced to generate significant performance for the sample stock, but also an early warning system can be effectively constructed in the market. The phenomenon of knowledge asymmetry is a natural outcome of professional cooperation. Constructing an appropriate WINDEX involves its own professional knowledge. It involves little regarding market efficiency in information and more regarding knowledge asymmetry. Once this type of professional knowledge begins to spill over, its effect must be marginally diminished.