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Adrian Pizzinga ; Rodrigo Atherino ; Cristiano Fernandes ; Rosane Riera Freire ;Revista Brasileira de Finanças 2007, 5 1

Author: Giuliano Lorenzoni

Source: http://www.redalyc.org/articulo.oa?id=305824757001


Revista Brasileira de Finanças ISSN: 1679-0731 rbfin@fgv.br Sociedade Brasileira de Finanças Brasil Lorenzoni, Giuliano; Pizzinga, Adrian; Atherino, Rodrigo; Fernandes, Cristiano; Riera Freire, Rosane On the Statistical Validation of Technical Analysis Revista Brasileira de Finanças, vol.
5, núm.
1, 2007, pp.
3-28 Sociedade Brasileira de Finanças Rio de Janeiro, Brasil Available in: http:--www.redalyc.org-articulo.oa?id=305824757001 How to cite Complete issue More information about this article Journals homepage in redalyc.org Scientific Information System Network of Scientific Journals from Latin America, the Caribbean, Spain and Portugal Non-profit academic project, developed under the open access initiative On the Statistical Validation of Technical Analysis Giuliano Lorenzoni* Adrian Pizzinga** Rodrigo Atherino*** Cristiano Fernandes**** Rosane Riera Freire***** Abstract Technical analysis, or charting, aims on visually identifying geometrical patterns in price charts in order to anticipate price “trends”.
In this paper we revisit the issue of technical analysis validation which has been tackled in the literature without taking care for (i) the presence of heterogeneity and (ii) statistical dependence in the analyzed data – various agglutinated return time series from distinct financial securities.
The main purpose here is to address the first cited problem by suggesting a validation methodology that also “homogenizes” the securities according to the finite dimensional probability distribution of their return series.
The general steps go through the identification of the stochastic processes for the securities returns, the clustering of similar securities and, finally, the identification of presence, or absence, of informational content obtained from those price patterns.
We illustrate the proposed methodology with a real data exercise including several securities of the global market.
Our investigation shows that there is a statistically ...

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