Effectiveness of Investment Strategies Based on MACD Indicator: Evidence from the Stock Exchange of Thailand

Abstract

This paper identifies the most effective investment strategies applying the MACD
indicator in the Stock Exchange of Thailand (SET). Among technical analysis indicator, it is known that MACD is the most effective momentum indicator. The data cover a period from January 2007- December 2015. Four investment strategies investigated include the main trend-following momentum indicator (or called main system); the main system with fund flows; main system with relative strength to SET; and main system with both fund flows and relative strength to SET. This paper found that all four strategies being tested, all perform better than “buy and hold” strategy or investing SET index. Among the four strategies tested, Strategy 4 yields the most effective results in higher annual return, but at the same time, it shows the highest average percentage loss.