5,000 Technical Trading Rules Shown To Be Useless

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A new global study has confirmed what many market participants may already feel – that technical analysis doesn’t work.

Interestingly, this latest study appears to have been conducted by Massey University in cooperation with Australia’s Macquarie Capital and Macquarie Bank.

SSRN: 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.

It would be great to have access to the full research piece. We wonder if it will have any impact on Macquarie’s technical research. Doubt it.

We also doubt it will change the behaviour of most technical traders. (Via Alea)

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