From: gts (gts_2000@yahoo.com)
Date: Fri Jun 13 2003 - 01:22:47 MDT
Peter C. McCluskey wrote:
> This causes stock prices to be sometimes slow to respond to new
> information, which causes trend following to be good on average.
> Once investors notice that fact, they cause trends to extend too far.
This is a nice theory but unfortunately it is only a theory. Also Friedman's
paper does not directly address the question of stock prices.
Statisticians in academia have never found empirical evidence of persistent
trends in the market, despite their numerous attempts to find them. I've
tried to find them also with my own computer analysis. Despite appearances,
and despite the many rational and convincing arguments for their existence,
they just plain don't exist.
There is a famous book titled _Technical Analysis of Stock Trends_ by
Edwards and Magee, written back around the 1940's. The book is a classic. It
is a real treasure. Original editions of this book are collectors items
among stockbrokers who know their business. For many years it was like a
bible to me. I did not realize at the time that it really IS a bible. It is
sacred scripture that defines the basic doctrines of the religion known as
technical analysis.
-gts
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