Advanced Search
MyIDEAS: Login to save this article or follow this journal

Behavioral Finance and Technical Analysis


Author Info

  • Dehnad, Kosrow


Registered author(s):


    Abstract Behavioural finance has challenged many claims of efficient market hypothesis (EMH). Unfortunately many of these challenges are in the form of anecdotal evidence and lack quantification. This article uses market data together with some simple statistics to show that in practice certain assertions of EMH and mathematical finance can be rejected with a high degree of confidence. The working of the FX market is used to demonstrate certain shortcomings of elegant results in mathematical finance that render them irrelevant in practice. An approach based on Markov chains is developed to model certain heuristic notions such as “fast market,” “support,” and “resistance,” that are widely used by “technical analysts” and practitioners. Using market observation, it is shown that this model better fits historical data than that implied by the assumption that daily returns are independent and normally distributed.

    Download Info

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Bibliographic Info

    Article provided by Capco Institute in its journal Journal of Financial Transformation.

    Volume (Year): 32 (2011)
    Issue (Month): ()
    Pages: 107-111

    as in new window
    Handle: RePEc:ris:jofitr:1464

    Contact details of provider:
    Postal: 120 Broadway, 29th Floor New York, NY 10271
    Phone: +1 212 284 8600
    Web page:

    Related research

    Keywords: Behavioral Finance; Technical Analysis; Volatility; Brownian Motion; Foreign Exchange; Efficient Market Hypothesis; Markov Chains; Mathematical Finance;

    Find related papers by JEL classification:


    No references listed on IDEAS
    You can help add them by filling out this form.



    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:ris:jofitr:1464. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Springett).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.