Investigating market efficiency in Russian stock market by modelling and performing trading strategies based on technical analysis

Abstract

From year to year there is a considerable growth in Russian stock market‟s indexes. There is also a continuous establishment of laws which regulate the functioning of stock market and protect investors from illegal activities. The political stability is observed during last years, which in fact lowers political risks for investors. Nowadays, Russia can be regarded as a country with rather low share of external debt, in compariosn with other countries such as USA, United Kingdom, Germany, etc. Therefore, Russian stock market can be considered as valuable instrument for investments‟ attraction. But in order to gainfully invest funds in the stock market, it should be carefully examined. But before that you should decide which tools of analysis to use in order to successfully make this investigation. This research accurately studies technical analysis which can be assigned to one of the respective schools of stock market analysis. The main aim of the research is to find out, whether we can detect market efficiency or inefficiency in Russian stock market by implementation of technical analysis on group of stocks. The practical part of this researh is devoted to modelling and perfroming trading strategies based on technical analysis on the stocks with high liquidity issues. The demand to liquidity is crucial one for prosperous implementaion of technical analysis. The insight to data is provided by demo account which was granted by brokerage‟s company. Analysis and further discussion revealed that technical trading strategy can be gainfully implemented in Russian stock market. Therefore, it was concluded that Russian stock market is not efficient and you can model and perform trading strategy based on technical analysis.