Far from Random: Using Investor Behavior and Trend Analysis to Forecast Market Movement
In Far from Random, Richard Lehman uses behavior-based trend analysis to debunk Malkiel’s random walk theory. Lehman demonstrates that the market has discernible trends that are foreseeable. By learning to spot these trends, investors and traders can predict market movement to boost returns in anything from equities to 401(k) accounts.
Exploring the role of technical analysis, Far From Random pro-vides a logical and well-constructed approach to the market in general and to stocks in particular. First, the myth that a stock is “worth” something based on its fundamentals is debunked. There is no promise by the corporation to pay anything back to the stockholder as there is to the bondholder. In fact, a stock’s worth is much more likely to be the collective opinion of thousands or millions of investors.
Those opinions are often subject to emotion—from acmes of greed to nadirs of fear. A stock’s price will vary greatly based on those emotions. Far From Random debunks the myth of the efficient market hypothesis (the so-called random walk). Simply stated, that hypothesis is based on the notion that stock prices are governed by rational, knowledgeable (unemotional) people.
We know that isn’t true, at least at market extremes. Stocks fluctuate in ways that traditional finance cannot predict or explain. Human emotions—fear and greed—play huge roles in the pricing of stocks, and those emotions are nowhere to be seen in either fundamental analysis or the efficient market hypothesis.
- The Time Has Come
- Fundamentally Flawed
- Subjective Value
- Random and Efficient Markets
- Market Timing
- New Thinking in Finance Isn’t Financial
- The Behavioral Phenomenon