Forum Archive Index - March 2004

["trader 100" <trader_100@hotmail.com>]

Academic finance is based around the concept of Market Efficiency.  "Weak 
Form Market Efficiency" postulates that abnormal profits can't be made using 
widely known information such as past prices.  Academic papers that have 
tested technical analysis have found that it is not possible to make profits 
that are statistically significant greater than a buy and hold profit after 
transaction costs are accounted for (with a very few exceptions).  These 
papers have focused on simple moving average rules.

My personal trading suggests that TA has a lot of value but I tend to 
include a lot of visual interpretation in my trading systems which make them 
difficult to quantify and test.  For an academic TA paper to be accepted it 
has to include a rule that is easily expressed so that it can be rigorously 
tested without any subjective human interpretation.

I am not so naive to think that someone will divulge their most profitable 
trading system but I do wonder if someone would be willing to provide me 
with a basic mechanical system that they believe is profitable.  I have the 
code developed to rigorously test such a system.

The gulf between academics and practitioners in their views on TA is huge.  
Any academic papers that attempt to bridge this gap are sought after.  If 
someone does provide me with code that stands up to the profitability tests 
and gives me permission to use it in a paper I would be more than happy to 
include them as a co-author.

Obviously, the code would need to prove profitable on a range of different 
stock / exchange rate series to overcome the criticism of curve fitting.

I look forward to some replies.

T100.

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