7.10.2005

Q&A: List some of the assumptions technical analysis makes...

...in regard to the notion of efficient markets.

  • The process of disseminating new information takes time.
  • Stock prices move to new equilibriums in a gradual manner.

Bonus Points

  • Technical Analysis can generate abnormal returns by detecting the significant stock price changes before others do.
  • Technical analysts do not believe any form of the EMH (no, no even the weak form), although EMH proponents do not rule out excess returns from technical analysis since markets do not adjust perfectly, leaving the possibility of over- or under-adjustment
    • Intra-day technical indicators and trading rules are good examples. The opportunities do not last long and so are generally only available to market participants who are continually trading.

Category: C++ Quant > Financial Markets

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