Can Technical Analysis be used to Enhance Accounting Information based Fundamental Analysis in Explaining Expected Stock Price Movements?

This paper provides new empirical evidence that price-based technical indicator variables can enhance the ability of accounting variables in explaining cross-sectional stock returns. We apply both OLS and state-space modelling to a sample of firms included in the Russell 3000 index over the period from 1999-2012 to compare the roles of the two main types of information typically used by stock investors. Empirical results reveal the importance of accounting variables over longer term horizons for particularly, small-cap stocks. Technical variables are shown to be important in the shorter term horizons. This result remains robust to alternative methodologies used. JEL classification: G12; G14