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Dear Bob,
Thank you for that. I suggest that everyone in the business take note of this
article and archive. You might need it someday.
Manning Stoller
Bob Fulks wrote:
> At 12:03 PM -0400 5/14/98, Manning Stoller wrote:
>
> >How much evidence do the academics need to acknowledge that technical
> >analysis has its place?
>
> >It will never happen, random walk is what they said 50 years ago and it
> >will never change. You can trace it back to their college days when their
> >teachers said it.
>
> At 10:47 AM -0400 5/14/98, Andy wrote:
>
> >>There are some prestigious academics who do acknowledge the importance of
> >>technical analysis. I'm thinking in particular of MIT's prestigious Dr.
> >>Andrew Lo.
>
> I was just reading an excellent new book by said Dr. Lo, "The Econometrics
> of Financial Markets", 1997, It is actually by three authors:
>
> John Campbell,
> Otto Eckstein Professor of Applied Economics at Harvard Un.,
> Andrew Lo,
> Harris & Harris Group Professor at the Sloan School of
> Management at MIT, and
> Craig MacKinlay, Professor of Finance at the Wharton School,
> Un. of Pennsylvania.
>
> Chapter 2 spends over 50 pages summarizing dozens of technical papers
> published in prestigious economic journals that addressed predicability of
> the markets and tests of the Random Walk Hypothesis. In the conclusion of
> the chapter, Section 2.9, they state:
>
> "Recent econometric advances and empirical evidence seem to
> suggest that financial asset returns are predictable to some
> degree. Thirty years ago this would have been tantamount to
> an outright rejection of market efficiency. However, modern
> financial economics teaches us that other, perfectly rational
> factors may account for such predictability. The fine
> structure of securities markets and frictions in the trading
> process can generate predictability. Time-varying expected
> returns due to changing business conditions can generate
> predictability. A certain degree of predictability may be
> necessary to reward investors for bearing certain dynamic
> risks. Motivated by these considerations, we shall develop
> many models and techniques to address these and other related
> issues in the coming chapters."
>
> Looks as if these teachers are finally getting the right idea!
>
> Bob Fulks
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