Korean Management Science Review (경영과학)

The Korean Operations Research and Management Science Society (한국경영과학회)
권호 표지
DOI QR코드

DOI QR Code

Trading Using Trend Reversal Pattern Recognition in the Korea Stock Market

추세 반전형 패턴 인식을 이용한 주식 거래

  • 권순창 (인천대학교 동북아경제통상대학 무역학부)
  • Received : 2012.09.17
  • Accepted : 2013.02.23
  • Published : 2013.03.31
Download PDF
⟨ Previous Next ⟩

Abstract

Although analysis of charts, which used in stock trading by distinguishing standardized patterns in the movements of stock prices, is simple and easy to use, there can be problems stemming from specific patterns being distinguished as a result of the subjective perspectives of analysts. In accordance with such problems, through the method of template pattern matching, 4 trend reversal patterns were designed and the fitness of the patterns were quantitatively measured. In cases when a stock is purchased when the template pattern fitness value is within a certain range and held for at least 20-days, the average return ratio was analyzed to be higher-with the difference being statistically significant-than the average return ratio attained from trading a stock according to the same method per the Efficient Market Hypothesis. From the results of stock trades of 2 domestic corporations to which the values of the 4 patterns had been applied based on the 4 strategies, it was possible to ascertain differences in the strategy- and pattern-dependent return ratios. Through this study, along with presenting the exceptions for the Efficient Market Hypothesis in stock trading, the fitness level of quantitative chart patterns was measured and the theoretical basis for application of such fitness level was proposed.

Keywords

References

  1. 김상락, "2차 함수를 이용한 비선형 패턴인식 알고리즘 구축", 한국경영과학회지, 제25권, 제4호(2000), pp.55-65.
  2. 김정훈, "김정훈의 투자 ABC 주가 기술적 분석 방법," 중앙일보, 2011.
  3. 민재형, 정철우, "유전알고리듬 기반 집단분류 기법의 개발과 성과평가:채권등급 평가를 중심으로", 한국경영과학회지, 제32권, 제1호 (2007). pp.61-74.
  4. 박강희, 신현정, "시계열 네트워크에 기반한 주가예측", 경영과학, 제28권, 제1호(2011), pp.53-60.
  5. 박기현, 유상진, "이동평균 개념을 이용한 웹사이트 사용자 관심도 예측 시스템", 경영과학, 제20권, 제1호(2003), pp.25-36.
  6. 이덕주, "데이비스 하딩 인터뷰", 매일경제, 2011.
  7. 최정일, "최첨단 기술적 지표", 진리탐구, 1996.
  8. Bauer, R.J. and J.R. Dahlquist, Technical market indicators:analysis and performance, John Wiley and Sons, 1999.
  9. Bo, L., S., Linyan, and R. Mweene, "Empirical study of trading rule discovery in China stock market," Expert Systems with Applications, Vol.28, No.3(2005), pp.531-535. https://doi.org/10.1016/j.eswa.2004.12.014
  10. Bulkowski, T.N., Encyclopedia of chart patterns, John Wiley and Sons, 2005.
  11. Chen, S.H. and C.H. Yeh, "On the emergent properties of artificial stock markets:the efficient market hypothesis and the rational expectations hypothesis," Journal of Economic Behavior and Organization, Vol.49, No.2 (2002), pp.217-239. https://doi.org/10.1016/S0167-2681(02)00068-9
  12. Colby, R.W. and T.A. Meyers, The Encyclopedia of Technical Market Indicators, Business One Irwin, 1988.
  13. Cootner, P.H., The random character of stock market prices, MIT Press, 1964.
  14. Downes, J. and J.E. Goodman, Barron's finance and investment handbook, Barron's Educational Series, 2003.
  15. Duda, R. and P. Hart, Pattern classification and scene analysis, New York:Wiley, 1973.
  16. Edwards, R.D. and Magee J. Technical Analysis of Stock Trends, 9th Ed, CRC Press, 2007.
  17. Fama, E., "Efficient Capital Markets:A Review of Theory and Empirical Work," Journal of Finance, Vol.25(1970), pp.383-417.
  18. Felsen, J., Beat the Market with a Provable Trading System at Low Risk, CDS Publishing Company, 2009.
  19. Fischer, R. and J. Fischer, Candlesticks, Fibonacci, and chart pattern trading tools: a synergistic strategy to enhance profits and reduce risk, John Wiley and Sons, 2003.
  20. Friesen, G.C., P.A. Weller, and L.M. Dunham, "Price trends and patterns in technical analysis： A theoretical and empirical examination," Journal of Banking and Finance, Vol.33, No.6(2009), pp.1089-1100. https://doi.org/10.1016/j.jbankfin.2008.12.010
  21. Fu, T.C., F.L. Chung, R. Luk, and C.M. Ng, "Stock time series pattern matching：Template- based vs. rule-based approaches," Engineering Applications of Artificial Intelligence, Vol.20, No.3(2007), pp.347-364. https://doi.org/10.1016/j.engappai.2006.07.003
  22. Gunasekarage, A. and D.M. Power, "The profitability of moving average trading rules in South Asian stock markets," Emerging Markets Review, Vol.2, No.1(2001), pp.17-33. https://doi.org/10.1016/S1566-0141(00)00017-0
  23. Kamich, B.M., Chart Patterns, Bloomberg Press, 2009.
  24. Kan, D. and B. Andreosso-O'Callaghan, "Examination of the efficient market hypothesis? the case of post-crisis Asia Pacific countries," Journal of Asian Economics, Vol. 18, No.2(2007), pp.294-313. https://doi.org/10.1016/j.asieco.2007.02.003
  25. Lee, K.H. and G.S. Jo, "Expert system for predicting stock market timing using a candlestick chart," Expert Systems with Applications, Vol.16, No.4(19999), pp.357-364. https://doi.org/10.1016/S0957-4174(99)00011-1
  26. Leigh, W., N. Modani, R. Purvis, and T. Roberts, "Stock market trading rule discovery using technical charting heuristics," Expert Systems with Applications, Vol.23, No.2 (2002), pp.155-159. https://doi.org/10.1016/S0957-4174(02)00034-9
  27. Leigh, W., N. Modani, and R. Hightower, "A computational implementation of stock charting: Abrupt volume increase as signal for movement in New York Stock Exchange Composite Index," Decision Support Systems, Vol.37(2004), pp.515-530. https://doi.org/10.1016/S0167-9236(03)00084-8
  28. Liu, J.N.K. and R.W.M. Kwong, "Automatic extraction and identification of chart patterns towards financial forecast," Applied Soft Computing, Vol.7, No.4(2007), pp.1197-1208. https://doi.org/10.1016/j.asoc.2006.01.007
  29. Lippens, R.E., "Multimaturity efficient market hypotheses:Sorting out rejections in international interest and exchange rate markets," International Journal of Forecasting, Vol.3, No.1(1987), pp.149-158. https://doi.org/10.1016/0169-2070(87)90084-7
  30. Liu, J.N.K. and R.W.M. Kwong, "Automatic extraction and identification of chart patterns towards financial forecast," Applied Soft Computing, Vol.7, No.4(2007), pp.1197- 1208. https://doi.org/10.1016/j.asoc.2006.01.007
  31. Lo, A.W., H.M Mamaysky, and J. Wang, "Foundations of technical analysis：computational algorithms, statistical inference, and empirical implementation," Journal of Finance, Vol.55(2000), pp.1705-1770. https://doi.org/10.1111/0022-1082.00265
  32. Malkiel, B.G., A Random Walk Down Wall Street (6th ed.), W.W. Norton and Company, Inc, 1973.
  33. Metghalchi, M., Y.H. Chang, and J. Marcucci, "Is the Swedish stock market efficient? Evidence from some simple trading rules Original Research Article," International Review of Financial Analysis, Vol.17, No.3(2008), pp.475-490. https://doi.org/10.1016/j.irfa.2007.05.001
  34. Murphy, J.J., Intermarket technical analysis : trading strategies for the global stock, bond, commodity, and currency markets, John Wiley and Sons, 1991.
  35. Pring, M.J., Martin Pring on price pattern s:the definitive guide to price pattern：the definitive guide to price pattern analysis and interpretation, McGraw-Hill Professional, 2004.
  36. Wang, J.L. and S.H. Chan, "Stock market trading rule discovery using pattern recognition and technical analysis," Expert Systems with Applications, Vol.33, No.4(2007), pp.304-315. https://doi.org/10.1016/j.eswa.2006.05.002
  37. Wang, J.L. and S.H. Chan, "Trading rule discovery in the US stock market：An empirical study," Expert Systems with Applications, Vol.36(2009), pp.5450-5455. https://doi.org/10.1016/j.eswa.2008.06.119
  38. Wikipedia, "Technical analysis," http://en.wikipedia.org/wiki/Technical_analysis.