The Real Reason the EMH has not been disspelled

Discussion in 'Economics' started by bwolinsky, Dec 10, 2008.

Do you agree that the WL backtest of this system disproves the Weak Form of the EMH?

  1. Yes

    0 vote(s)
  2. No

    0 vote(s)
  1. <b>Please read the entire first post before voting, and I hope that, not only, do you already know what forms of the EMH are, but that you have read and understand my argument as to why weak form EMH, especially is false. </b>

    Yes, I'm serious. Why? The reason that the EMH has not been proven false is that researchers have not used the correct programs to write profitable systems. The strategies written in the papers that supposedly "prove" the EMH are moronic at best. The best trading systems available at have proven to be ones that defy EMH.

    I am positing that the reason is in the research. The researchers have not attempted to find ways of actually proving that "there are $100 bills lying around." This is the real issue that underlies the EMH both in its weak and semi-strong forms. Strong is basically only insiders win, and we've found that's not always the case. Weak says technical analysis won't work, and that is where the problem lies. What kind of technical analysis? I've found no research that has attempted to disprove the validity of the most profitable, publicly available chartscript ever written in Wealth Lab.

    Here's the problem: Most research summaries testing both EMH weak and semi-strong were written prior to any experimentation on profitable trading system development, including technical analysis.

    The technology to complete such a study in its entirety was not available before portfolio level backtesting that, even now, is only available in Wealth Lab Pro version 4.xx. These researchers would be startled to find the results going back to 1/1/1996 in the attachment. Prior to WL, they were not even working with all available prices. They mostly dealt in only closing prices, and used incredibly simplistic yet unprofitable strategies as their basis for proving any form of the EMH, including fundamental and insider trading data. I've found no profitable system using Fundamental and/or insider trading data available as fundamental datasets in Wealth Lab Pro.

    For these reasons, I believe a significant study should be completed in particular with regard to SuperBands, with Linear Regression Analysis. The fact is that this system has shown to make significant profits over time, but the typical refutation of this announcement is that 1) It does not overcome transaction costs, and 2) It does not beat a simple buy and hold strategy.

    On both of these accounts I have beaten the buy and hold significantly, and, not only that, I did not risk nearly 80% of my account to do it either, so buy and hold has no relevance in the results.

    Transaction costs can arguably lessen it's performance, sure, but, in the end, on average, these trades will perform the same. That's the most important thing to remember about the EMH weak: 1)No time was spent developing profitable strategies 2) Of course there is no correlation on daily data using runs test analysis. There use of these runs tests as a basis for announcing that the Weak Form EMH was valid is not actually a basis at all. I'm not denying that they aren't correlated, but that says nothing about developing a trading system.

    I consider myself the best trading strategy developer in this country. The reason EMH Weak is false is because the technology nor the time has been spent researching <i>why it's not true.</i>

    Today, I put forward that SuperBands, with Linear Regression Analysis absolutely disproves weak form EMH.

    If you agree, say, yes, or no.