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How to reconcile Market Efficiency and Technical Analysis

Alexandra Ilinskaia·Kirill Ilinski
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Abstract

Weak form of the Efficiency Market Hypothesis (EMH) excludes predictions of future market movements from historical data and makes the technical analysis (TA) out of law. However the technical analysis is widely used by traders and speculators who steadely refuse to consider the market as a "fair game" and survive with such believe. In the paper we make a conjecture that TA and EMH correspond to different time regimes and show how both technical analysis predictions for short times and realistic statistical data for larger times can be obtained in a simple single stock model of Gauge Theory of Arbitrage.

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Alexandra Ilinskaia, Kirill Ilinski. 1999-02-03. How to reconcile Market Efficiency and Technical Analysis. https://arxiv.org/abs/cond-mat/9902044

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