An analysis of technical factor returns on the Warsaw Stock Exchange, 1999–2009

Profitability of investment strategies based on technical analysis is one of the basic practical problems in asset management. Standard multifactor models of portfolio returns in current use are based mainly on a combination of fundamental factors (e.g. Fama and French model [1996]), a momentum factor (see e.g. [Jegadeesh and Titman, 2001]) and asset class type factors [Sharpe, 1992]. Except the momentum factor these factors have no direct links to technical analysis. Two areas of investigation seem therefore important: the examination of profitability of technical portfolios i.e. portfolios of assets formed using criteria based on technical analysis with the existing multifactor models, and the construction of technical factors i.e. benchmark technical portfolios, for possible inclusion in factor models