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UBC Theses and Dissertations

Computerization and testing of the on-balance volume method Clarke, George Gordon

Abstract

The 'On-Balance Volume' (OBV) method of technical analysis for stock market decision making is the creation of Joseph Granville and was first described in his 1963 book, "New Key to Stock Market Profits". The method uses daily stock prices and volumes to generate further information which is then analysed for buying and selling opportunities. Granville proposes eighteen signals for the analyst to determine these opportunities. The purpose of this study is to develop a computer model of the OBV method and to test this model on a series of stocks to determine if the method is feasible for use by technical analysts. Furthermore the study attempts to determine those segments of the method which have the best success for further study. This study abstracts the basic OBV method and develops a computer model for testing the validity of the method. A detailed description of the model and the assumptions used is provided. A series of five Canadian companies were tested on the OBV model. Analysis of the results indicated that on an overall basis the method does not generate a high return on investment. Although two of the five stocks showed profits when tested, the variability of returns was too large to accept the method as profitable. On an individual signal basis however, certain of the signals were found to provide the majority of the profitable trades. Further work into the development of models using these signals is recommended.

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