Behavioral Finance and Technical Analysis
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.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
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.
Volume (Year): 32 (2011)
Issue (Month): ()
|Contact details of provider:|| Postal: |
Phone: +1 212 284 8600
Web page: http://www.capco.com/
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 references are entirely missing, you can add them using this form.