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The use of technical analysis by fund managers: International evidence

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  • Menkhoff, Lukas

Abstract

The use of technical analysis by financial market professionals is not well understood. This paper thus analyzes survey evidence from 692 fund managers in five countries, the vast majority of whom rely on technical analysis. At a forecasting horizon of weeks, technical analysis is the most important form of analysis and up to this horizon it is thus more important than fundamental analysis. Technicians are as experienced, as educated, as successful in their career and largely just as overconfident in decision-making as others. However, technical analysis is somewhat more popular in smaller asset management firms. What we find most significant is the relation of technical analysis with the view that prices are heavily determined by psychological influences. Consequently, technicians apply trend-following behavior.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 34 (2010)
Issue (Month): 11 (November)
Pages: 2573-2586

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Handle: RePEc:eee:jbfina:v:34:y:2010:i:11:p:2573-2586

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Keywords: Fund managers Technical analysis Fundamental analysis Personal characteristics Investment behavior;

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Cited by:
  1. Chuang, Wen-I & Susmel, Rauli, 2011. "Who is the more overconfident trader? Individual vs. institutional investors," Journal of Banking & Finance, Elsevier, Elsevier, vol. 35(7), pages 1626-1644, July.
  2. Shynkevich, Andrei, 2012. "Short-term predictability of equity returns along two style dimensions," Journal of Empirical Finance, Elsevier, Elsevier, vol. 19(5), pages 675-685.
  3. Andrew Clare & James Seaton & Peter N. Smith & Stephen Thomas, 2012. "The Trend is Our Friend: Risk Parity, Momentum and Trend Following in Global Asset Allocation," Discussion Papers, Department of Economics, University of York 12/25, Department of Economics, University of York.
  4. Yamamoto, Ryuichi, 2012. "Intraday technical analysis of individual stocks on the Tokyo Stock Exchange," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(11), pages 3033-3047.
  5. Jun-jie Chen & Bo Zheng & Lei Tan, 2014. "Agent-based model with asymmetric trading and herding for complex financial systems," Papers 1407.5258, arXiv.org.
  6. Li-Xin Wang, 2014. "Dynamical Models of Stock Prices Based on Technical Trading Rules Part III: Application to Hong Kong Stocks," Papers 1401.1892, arXiv.org.
  7. Li-Xin Wang, 2014. "Dynamical Models of Stock Prices Based on Technical Trading Rules Part II: Analysis of the Models," Papers 1401.1891, arXiv.org.
  8. Martin Scholtus & Dick van Dijk, 2012. "High-Frequency Technical Trading: The Importance of Speed," Tinbergen Institute Discussion Papers 12-018/4, Tinbergen Institute.
  9. Shynkevich, Andrei, 2013. "Time-series momentum as an intra- and inter-industry effect: Implications for market efficiency," Journal of Economics and Business, Elsevier, Elsevier, vol. 69(C), pages 64-85.
  10. Popov, Maxim & Madlener, Reinhard, 2014. "Backtesting and Evaluation of Different Trading Schemes for the Portfolio Management of Natural Gas," FCN Working Papers, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) 5/2014, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  11. Christopher J. Neely & Paul A. Weller, 2011. "Technical analysis in the foreign exchange market," Working Papers, Federal Reserve Bank of St. Louis 2011-001, Federal Reserve Bank of St. Louis.
  12. Shynkevich, Andrei, 2012. "Performance of technical analysis in growth and small cap segments of the US equity market," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(1), pages 193-208.
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