| Topic Name: |
CMT |
| Message Name: |
garbage |
| Date Posted: |
07/30/2001 |
| In Reply To: |
I am MBA, CFA, CPA and CMT level 2 candidate. Most IM shops whether they publicly admit or not use technical analysis to a considerable extend to time the trade. I know for fact that leading Mutual Fund companies use it.
Prof. Andrew Lo of MIT has come up with an interesting paper which demonstrates that Technical Analysis actually works. TA is a branch of behavioural finance. Uni of Chicage and prof. Thaler have been researching on this topic and have found some evidences. Please act like professional and view things from professional standpoint and don't give opinion based on layman's level of knowledge. (CFA or candidates out there remember BAPM Behavioral Asset Pricing model vs CAPM??) |
| Message: |
Congratulations on having several useless certifications.
No, you are just falsely claiming that TA is behavioral finance. It's simply not true. First, TA has been around a lot longer than BF, so the claim that it's a branch of BF cannot be true.
Behavioral finance has a totally different basis than TA. First, BF is based on scientific studies. Are the patterns based upon scientific studies? No, of course not. I have never seen any technician be able to derive the patterns from scientific psychological studies. Maybe I just haven't seen the brilliant work going on. Somehow, I severely doubt it. Prove it and I'll believe it. As usual, the TA community finds a coincedental overlap between the chicken entrails they read and real financial scholarship and claims that BF supports TA. It doesn't.
I'll ask Lo whether your claim is correct. My suspicion is that he won't confirm that. Real scholars don't make claims that grand, especially in the first round of studies. We'll see - I'll check.
Now, about whether IM shops use TA. I've been around and yes, a few big shops will have at most one or two TA-interested people (usually traders). One or two people per shop, while they have 10,20,100 fundamental or macro analysts. At best, it's a TINY percentage of their employees. You want to go for that one job? Excellent - you won't be in my way then.
Most TA-focused shops are rinky-dink, almost-no-money under-management outfits.
Timing the trade is a small part of the whole process. To spend a massive quantity of time on that seems to me to be a waste of effort.
Basically, this business is analyzing investments. All the charts show me is the past history of prices, when the analyst is mostly concerned with the future. It's a sloppy and lazy way to do things and most firms are looking for people with the analytical skills to do more.
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