Individual investors might be best suited to stick to fundamental analysis rather than technical trading, according to a new academic study. Those using technical analysis “disproportionately prone to have speculation on short-term stock-market developments as their primary investment objective” “We find that individual investors who use technical analysis and trade options frequently make poor portfolio decisions, resulting in dramatically lower returns than other investors, said researchers Arvid Hoffmann and Hersh Shefrin. Individual investors who utilize technical analysis “disproportionately prone to have speculation on short-term stock-market developments as their primary investment objective, hold more concentrated portfolios which they turn over at a higher rate,…
Individual Investors Lose Money When Using Technical Analysis
Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.
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