The Ability of Elliott Waves Theory to Predict the Information Content of Accounting Profit

Subject Areas : Financial Engineering

Hossein Alizadeh ¹ (PhD student in Financial Engineering, School of Management, Islamic Azad University, Arak Branch)
Majid Zanjirdar ² (Departman of Finance, Islamic Azad University ,Arak, Iran)
Gholamali Haji ³ (گروه اقتصاد، واحد اراک، دانشگاه آزاد اسلامی، اراک، ایران)

Received: 2022-01-24 Accepted : 2022-04-12 Published : 2024-09-26

Keywords: Elliott Waves, Theory Profit Information Content(PIC), Insider Trading, Confidential Information,

Abstract :

This study intends to investigate the ability of Elliott Waves Theory (EWT) to predict the information content of accounting profit before its announcement in companies listed on the Tehran Stock Exchange from 1394 to 1399(Iranian calendar). The present study is applied research in terms of the result’s implementation and to collect the data required for the research, the information site of the publishers of Tehran Stock Exchange and Rahavard Novin software and for receiving Elliot Waves signals Advanced GET software has been used. Earnings information content was measured through the test of the relationship between earnings and abnormal returns based on the Portetti model [20]. In order to calculate the abnormal returns, the Zebrowski comprehensive return relationship was used. Finally, the effect of two variables, company size and type of industry, on the ability to predict information content is considered. The results showed that the quarterly profits announced by companies have information content, and EWT can predict profit information content before announcing it. In this regard, company size and industry type do not affect Elliott Waves’ ability to predict profit information content.

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