From: Robin Hanson (rhanson@gmu.edu)
Date: Fri Oct 22 1999 - 08:14:30 MDT
Max More wrote:
> >I'm not sure what you mean by "technical analysis" here.
> >(I presume you don't mean than you dislike analyses
> >which contain numbers.)
>
>You might want to read a primer on technical analysis if you want to know
>what people mean when they say they don't trust technical analysis. The
>term has a specific meaning in the world of stocks -- it most certainly
>does not mean anything like academic or scientific studies. It involves
>pouring over charts of moving averages, MACD, Bollinger Bands, Stochastic
>Occillators, On Balance Volume, and so on.
Perhaps I wasn't clear enough -- I know that "technical analysis" roughly
means trying to infer future stock prices solely from patterns in recent
time series of such stocks. And I know a lot of people lose a lot of money
investing on such analyses. But I think it is completely unfair to dismiss
Shiller's analysis (at http://www.econ.yale.edu/~shiller/peratio.html ) by
throwing the label "technical analysis" at it.
Shiller has long been one of the top researchers working to understand
stock volatility. He knows in great detail the many theories we have
to understand stock movements, and the data which supports or contradicts
them. Given those theories, he (and I) find it quite reasonable to
suspect that high prices suggest a bad deal and low prices a good deal.
(You know, "buy low, sell high.") Shiller then *tests* this expectation
by looking at real data. If you're going to then dismiss his analysis
as "technical" because it refers to real data, then you seem to me to
be saying that you are so sure that you are right about stocks that data
is irrelevant.
>... it is not patterns on a chart that determine stocks prices,
>it is things like changing profit margins, new product introductions,
>changes in competition, rising or falling expenses, management changes, and
>external economic factors such as interest rates and inflation.
Of course those are theories, that such things predict stock prices.
And how would we check those theories? By looking at actual stock prices.
Robin Hanson rhanson@gmu.edu http://hanson.gmu.edu
Asst. Prof. Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030
703-993-2326 FAX: 703-993-2323
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