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#2
11-13-2007, 01:59 PM
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Re: Why are value investor types so rigidly opposed to TA?
The are a few problems with TA (all of which are really the same thing):
1) There are a variety of definitions of TA, many of which contradict each other. 2) No one can ever explain why TA (regardless of definition) should work, only that "it just works". Which by the way, is a viewpoint sorely lacking in evidence. 3) As mentioned, it is kind of curious that all of the long term great investors practiced some variation of FA. 
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#3
11-13-2007, 02:23 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
The are a few problems with TA (all of which are really the same thing): 1) There are a variety of definitions of TA, many of which contradict each other. [/ QUOTE ] this is the one i have the most trouble with. wtf is TA? lol. [ QUOTE ] 2) No one can ever explain why TA (regardless of definition) should work, only that "it just works". Which by the way, is a viewpoint sorely lacking in evidence. [/ QUOTE ] well on some definitions of TA there is definitely documentation and studies that prove it works over time but can't be expected to in the future. the reason is because it has been documented to have worked over time LDO. my favorite viewpoint on the subject is from Benoit Mandelbrot. he is arguably one of the smartest people of the century (20th) and certainly contributed a ton to mathematical and statistical undertakings. he wrote that with is methodology of replicating price charts, he fooled many technical analysts who immediately showed him supports, reversals etc. etc. etc. thinking that the price charts were actual market data instead of a totally made up random simulation. he refused to believe that TA is worth while simply because he could so easily fool its practitioners. he did concede though, and i do as well, that TA seems to work in some instances and there is one logical reason i can think of: one unchanging factor of TA seems to be human reaction to price movements. there are psychological factors that imo cause humans to act a certain way and TA uses proxies (unknowingly possibly) of those traits in its practitioning. [ QUOTE ] 3) As mentioned, it is kind of curious that all of the long term great investors practiced some variation of FA. [/ QUOTE ] yet some great hedge funds use TA and are killing it (here you have to include quantitative strategies as TA since they are based on arguably non- fundamentel factors) ... i.e. renaissance, shaw etc. it doesn't take mathematicians to do fundamental analysis but simons only hires the absolute creme de la creme from the math/stat world (for the most part he doesn't even look at US PhDs...which says something about our education in that subject). so i think he's pretty much a TA type, but again, goes back to wtf is TA??? great post btw spider. Barron
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#5
11-13-2007, 02:28 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
There are people killing the lottery too. [/ QUOTE ] horrible analogy for the guys killing the markets i mentioned. simons isn't some lottery winner. neither is shaw. there are TONS of TAs though that of course this analogy could very aptly apply to ... but simons and shaw aren't two of them. Barron
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#6
11-14-2007, 05:14 AM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
[ QUOTE ] There are people killing the lottery too. [/ QUOTE ] horrible analogy for the guys killing the markets i mentioned. simons isn't some lottery winner. neither is shaw. there are TONS of TAs though that of course this analogy could very aptly apply to ... but simons and shaw aren't two of them. Barron [/ QUOTE ] Do you have any links to verified track records and description of methods used? Something like this one used in support of value investing: http://www1.gsb.columbia.edu/valuein...ves/DOC032.PDF
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#7
11-13-2007, 03:38 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
yet some great hedge funds use TA and are killing it (here you have to include quantitative strategies as TA since they are based on arguably non- fundamentel factors) ... i.e. renaissance, shaw etc. it doesn't take mathematicians to do fundamental analysis but simons only hires the absolute creme de la creme from the math/stat world (for the most part he doesn't even look at US PhDs...which says something about our education in that subject). so i think he's pretty much a TA type, but again, goes back to wtf is TA??? [/ QUOTE ] While in some places there is a tenuous relationship between quant and TA, it is in their practice that they tend to be quite different and partially explains why TA is an easy target. How much TA have you seen that is tested with any scientific rigor? To compare the overwhelming majority of TA participants to RenTech is to compare top modern physicians to ancient blood letters.
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#8
11-13-2007, 04:11 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
there is one logical reason i can think of: one unchanging factor of TA seems to be human reaction to price movements. there are psychological factors that imo cause humans to act a certain way and TA uses proxies (unknowingly possibly) of those traits in its practitioning. [/ QUOTE ] Yeah, I'll admit I could see TA working for psychological reasons, which I think is roughly like saying some people can make money with momentum investing or short term timing the market. However, I suspect this is probably specific to individuals (i.e. can't be taught). Good Mandelbrot story.
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#10
11-13-2007, 06:42 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
[ QUOTE ] there is one logical reason i can think of: one unchanging factor of TA seems to be human reaction to price movements. there are psychological factors that imo cause humans to act a certain way and TA uses proxies (unknowingly possibly) of those traits in its practitioning. [/ QUOTE ] Yeah, I'll admit I could see TA working for psychological reasons, which I think is roughly like saying some people can make money with momentum investing or short term timing the market. However, I suspect this is probably specific to individuals (i.e. can't be taught). Good Mandelbrot story. [/ QUOTE ] momentum investing is definitely important though and the psychological factors are part of the fundamental drivers of it. my old employer constructs a buy/sell signal totally on fundamental relationships (doesn't day trade...takes long view positions etc.) and 1/3 of that signal is basically momentum indicators. Barron
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