Forum Archive Index - September 2003

["Dave Missen" <d.tackle@xtra.co.nz>]

With regards to TA, I have noted that a number of the academics that teach
the topic at masters levels in NZ universities don't appear to be
multi-millionaires, and in fact have been heard to comment that they have
taken severe hidings over the years relying on the traditional statistical
approaches to TA.

In saying this I don't discount the benefits of TA, I do agree with the
comment that the model needs to be reconsidered, but as with all things in
economics the model that is being used is attempting to quantify
market/human behaviour which is often at best irrational.

As such, I believe that TA should only be relied upon as yet another
ingredient in the decision making process regarding investment analysis.

Some excellent material has been written on the topic and some techniques
actually perform in accordance with the models put forward for short periods
but general evidence tends to show that Mr Market is far more random than
statistical approaches suggest.

Each to their own but my view is that good old fashioned fundamentals will
out perform TA everytime when longer time horizons are being considered.
----- Original Message ----- 
From: "Stephen Judd" <sljudd@paradise.net.nz>
To: <sharechat@sharechat.co.nz>
Sent: Thursday, September 18, 2003 8:34 PM
Subject: RE: [sharechat] On-balance-volume


> On Thu, 2003-09-18 at 17:31, david.gibson wrote:
> > I have been thinking about the point you raised in you email:
> >          Dow Jones stocks have huge capitalisation trading volumes. I
> >         could be argued that small-mid cap stocks have different
> >         characteristics to Dow Jones stocks. Any comments?
> >
> > The predominant acedemic view in the 80's and early 90's was that the
> > stockmarket obeyed "the law of large numbers" and that stock time
> > series were a "random walk" phenomenon based on the "efficient market"
> > theories.
> >
> > My personal view is that these assumptions are false.
> >
> > Conventional models based on the assumption of zero autocorrelation of
> > stock trajectories  are clearly false - yet this is the dominant view
> > in the acedemic literature.
>
> That's not an assumption. If you read Malkiel's "Random Walk Down Wall
> St", you'll see that he and his students tested TA empirically - and
> found that it performed no better than buy and hold, or after brokerage,
> even worse. You can argue that their choice of signal might have been
> wrong, or that the state of the art has improved since the 80s, but
> their criticism was based in actual evidence, not just reasoning from
> first principles.
>
> Stephen
>
>
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