Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271857 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10213
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper examines the main drawbacks of technical analysis. Although this is widely used by practitioners, from an academic perspective it can only be seen as a form of "voodoo finance". In particular, it runs into the following pitfalls: Subjectivity; Doubtful assumptions; Unjustified algorithms; Low profitability; Data snooping; Statistically insignificant results; Unrealistic simplifications. The key conclusion is that it is high time that (self-fulfilling) technical analysis be replaced by more sophisticated time-series forecasting methods and models such as fractional integration, R/S analysis and autoregressive specifications .
Subjects: 
technical analysis
data snooping
financial markets
price forecasting
trading
JEL: 
C63
D84
E37
G12
Document Type: 
Working Paper
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