Why do the academic guys hate Technical analysis?

Discussion in 'Trading' started by 0008, Nov 25, 2002.

  1. 0008


    I never meet a guy working in the academic institutes that accept technical analysis. Some of them put the users of TA in the same level of bin Laden. :D I wonder why they need to be so extreme. Anyone know the reasons?
  2. ask vladiator
  3. Yannis



    I think you are only partially correct.

    For a long time, academe sided with the proponents of fundamental analysis which is the favorite approach of most major brokerages and mutual fund companies - which traditionally funded most of that research.

    However, lately, things have been changing. There have been several important papers published (most recently by 2 researchers at MIT) that "proved" the validity of TA.
  4. 0008


    Only 2 at MIT? I know one is Andrew Lo. But I could find more than hundred or even thousand of them that hate TA! :D

    Do you also mean the academe sided with the funds and the brokers to 'sell' FA? :D Does it mean the TA guys had not funded any research? Are they too poor? Or they are too rich that don't bother to know what the academs doing?
  5. cheeks


    If TA works, it is not just a chink in the armour. It would rip the entire foundation of the efficient Market hypothesis away.

    I think that is why they get a little defensive.:)
  6. TA is not accepted by academics (for the most part) since it cannot be quantified. it is an art not a science.


  7. maybe because it makes hamburgers out of their sacred cow (efficient markets god)?
  8. Near all colleges have art subjects! And TA can be quantified if you only use indicators, not patterns.
  9. hermit,

    please explain what you mean, when you say--TA can be quantified using indicators not patterns.

    thanks !

  10. COME ON, you guys! :D This is getting ridiculous. Read the looooong recent thread on market efficiency for the answers. NO, brokerages DID NOT fund EMH research! :D It's not about funding AT ALL. Finance reseach is very different from research say in physics where pretty much all the funding comes from outside. The good thing about being a finance professor is that you are paid well enough to afford researching pretty much want you want.
    Cheeks, it IS a chink in the armour. Most of TA you are talking about is very short term. Try moving several billion dollars as you trade your short term strategies... Yes, you can probably make a few thousand here and there if you are smart enough. The key words being "smart enough". The money you will make will just about compensate you for the time/effort/risks.
    Only 2 researchers at MIT??
    Or shut up! Who's the dude plugging MIT all the time???
    Did you just graduate from there or what? B/c it seems those are the only people you know. There are hunderds of publications in the burgeoning behavioral finance field that show why TA <i>might</i>work. Let me guess, the other guy at MIT is Wesley Chan who recently graduated with a PhD from MIT and is now wokring for Andew Lo's recently founded fund b/c he couldn't land a job in academia and Lo was his dissertation chair so he took him in????
    Having said that I have to add that YES, there are some potential strategies that can make a lot of money. But I doubt that they are based on pure TA and/or that an average dabbling joe will ever get there.
    Read the posts by Traden4Alpha towards the end of the "Efficient Markets Hypothesis..." thread.
    He's a lot more eloquent than me (and probably a little less biased :D)
    #10     Nov 25, 2002