Step forward Ben Marshall, Rochester Cahan and Jared Cahan, from Massey University, New Zealand.
In the most polite and professional terms, these three academics have been telling people for some time now that using purely technical rules to trade does not add any value beyond what might be expected by chance.
The trio have now released their most comprehensive dissing of this branch of financial science hocus pocus in an all-encompassing paper, Technical Analysis Around the World. Abstract:
Technical analysis is not consistently profitable in the 49 countries that comprise the Morgan Stanley Capital Index once data snooping bias is accounted for. There is some evidence that technical trading rules perform better in emerging markets than developed markets, which is consistent with the finding of previous studies that these markets are less efficient, but this result is not strong. While we cannot rule out the possibility that technical analysis compliments other market timing techniques or that trading rules we do not test are profitable, we do show that over 5,000 trading rules do not add value beyond what may be expected by chance when used in isolation.
5,000 trading rules applied across 49 countries - and none of them work at all?
Oh well.
H/T Alea
