Information Asymmetry and Performance of Technical Analysis During Times of Crises in Scandinavian Markets
Abstract
This thesis investigates the probability of informed trading (PIN) during crisis periods acrossthe Norwegian, Swedish, and Danish stock exchanges. The focus is on the financial crisisof 2008, the COVID-19 pandemic, and the Russia-Ukraine war. Utilizing the frameworkof Hung and Lai (2022), this study examines the effectiveness of the technical analysisindicators Moving Average Crossover (MAC) and Moving Average Convergence Divergence(MACD) conducted on the Oslo Stock Exchange. The crises are sectioned into pre-, during,and post-crisis periods, estimating PIN for each phase on the separate exchanges to identifypatterns across the different markets. Our results indicate a higher probability of informedtrading during the financial crises compared to the health or geopolitical crises, with variousPIN values observed among the Scandinavian markets. Furthermore, we investigate theperformance of technical analysis during periods of varying information asymmetry. Thefindings suggest that using a MAC strategy before and during a financial crisis outperformsa Buy-and-Hold (BH) strategy. However, there are no significant outperformance measuresfor the health and geopolitical crises. The thesis contributes to the understanding of marketbehavior during uncertainties in financial markets, highlighting the information asymmetryin disruptive time periods. Despite having limitations, the research paves the way for futureresearch to refine our findings and explore further market contexts.