Chapter 2 Foundations of technical analysis: computational algorithms, statistical inference and empirical implementation

ANDREW W. LO

HARRY. MAMAYSKY

JIANG. WANG

2.1 INTRODUCTION

One of the greatest gulfs between academic finance and industry practice is the separation that exists between technical analysts and their academic critics. In contrast to fundamental analysis, which was quick to be adopted by the scholars of modern quantitative finance, technical analysis has been an orphan from the very start. It has been argued that the difference between fundamental analysis and technical analysis is not unlike the difference between astronomy and astrology. Among some circles, technical analysis is known as ‘voodoo finance’. And in his ...

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