| dc.description.abstract | With the establishment of effective domestic bond trading platform, both the information disclosure and trading volume in bond markets have been substantially improved. Aside from fundamental analysis, proprietary traders frequently apply technical analysis to evaluate market trend. The purpose of this research is to investigate the effectiveness of technical analysis in bond trading. Along with the completeness of bond short-selling policy, bid-offer trading strategies have become more feasible. This study introduces an arbitrage trading strategy and its profitability. Furthermore, I also investigate the seasonality patterns in bond markets.
These examines the validity of various technical tools, i.e. Moving Average (MA), Moving Average Converge/Diverge (MACD), Relative Strength Index (RSI), and Stochastic line (KD) in Taiwan’s bond markets. The results show that using MA signal to engage in a buying strategy often generates positive returns; however, it is less significant in a selling strategy. MACD signals also produce similar results, i.e. buying strategy generates positive returns and selling strategy does not show much relevancy. Moreover, using KD signal will result in negative returns, regardless of buying or selling. Using KD signal to engage in opposite direction trading has a greater opportunity to generate positive returns. As for RSI, the signals can be divided into two parts. Using RSI values in both buying and selling strategies will result in negative returns. On the other hand, by using short-term and long-term RSI signals, buying strategy will provide positive returns and selling strategy will provide negative returns.
By examining the calendar effects, I find that there exist some weekday patterns; the returns on Wednesdays and Mondays are generally positive. When examining the monthly effect, the return for the month of September has notably been negative. There is, however, average returns are not significantly different across seasons. Overall, the evidence appears to suggest some potential profits for proprietary trading business. | en_US |