The Impact of Country-Level Transparency and Financial Secrecy on the Profitability of Technical Trading Rules: Global Evidence

Abstract

analysis (TA) represents a prominent area of investigation within the realm of finance and investment literature. However, theoretical explanations regarding the underlying causes of divergent profitability outcomes observed in technical trading rules, both across different markets and over varying time periods, have posed a longstanding issue in the academic domain. This thesis consists of four empirical independently interconnected essays that provide the following: (i) an up-to-date overview about the profitability of widely and commonly used technical trading strategies; and (ii) theoretical explanations for why technical trading strategies might [sometimes be profitable for some markets but not others? This is accomplished using the Efficient Market Hypothesis (EMH), time-variant differences in country-level transparency, and differences in country-level national cultures. Specifically, the purpose is to answer the following three main research questions: (1) are technical trading rules still profitable in different markets with different efficiency levels? (2) do differences in country-level transparency explain discrepancies in the profitability of technical trading rules across markets?; and (3) do differences in country-level national culture explain discrepancies in the profitability of technical trading rules across markets? Data for the G20 countries and 14 European Union (the 20th member of G20) country members from January 2000 to December 2020 is employed here. Data is obtained from secondary source platforms. The quantitative techniques employed are the random- and fixed effects panel data regression, extreme bounds analysis (EBA), and a number of robustness check tests to test our hypotheses. This thesis contributes to the theoretical knowledge on this topic by providing new explanations for the contradictory results regarding the profitability of technical trading rules in various finance, behavioral finance, investment, cultural literature, and governance areas. The study has practical important implications for scholars, traders, and policymakers.