But in the long run no one beats the chimp with a dart board.
On Nov 24, 2008, at 10:24 AM, Paul C Bernhardt wrote:
I'm not sure what Stephen would include under "technical analysis"
either.
But, the term Technical Analysis has a precise meaning among stock
traders.
http://en.wikipedia.org/wiki/Technical_analysis
http://stockcharts.com/school/doku.php?id=chart_school
http://www.investopedia.com/university/technical/
It is a collection of numerical and pattern interpretation
procedures of the
past behavior of a security (price and volume of trading, usually)
that are
used to determine the near and long term change in value of that
security.
Technical analysis does not take into account any financial
characteristics
of the economy, nation, sector of operations, company finances,
sales, cash
flow, outstanding shares, competitive position, etc. It is just
based on
charts of the past behavior of the stock (or other security) price.
I'm not sure that this is true in practice -- too much competition
and pressure to get an edge.
The good news is (as Paul Meehl would predict) that it does better
than other types of financial modeling.
That's why I invest exclusively in index funds.
Example: Technical analysis occasionally talk in terms of "head and
shoulder" patterns (meaning the stock will head downward due to
'falling off
the other shoulder.' (I'm not kidding.)
http://www.chartpatterns.com/headandshoulders.htm
From what I can tell, in its degree of scholarship and supporting
evidence
it is indistinguishable from psychic readings. Therefore, it is no
surprise
to me that stock brokers and traders are calling psychics in
greater numbers
(assuming the anecdotes in the story represent an actual trend).
Many of
them believe in Technical Analysis regardless of its lack of
theoretical and
empirical support, so why not call a psychic, too?
Paul Brandon
Emeritus Professor of Psychology
Minnesota State University, Mankato
[EMAIL PROTECTED]
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