The information content of high, low and close prices

This paper attempts to reveal the predictability of candlestick analysis to future price and volatility. We find that high and low price series are more sensitive to price volatility than close prices. Difference of high and low price series is more effective to forecast volatility. More importantly, we find that there exists cointegration relationship among high, low and close price series. In the long run, close prices are more likely to be affected by high and low prices of past trading day.