Origen Matematico Del Analisis Técnico

Aswath Damodaran

Charting and Technical Analysis
Aswath Damodaran

1

Information

New information comes out about the
firm.

The Random Walk Hypothesis
All information about the firmis
publicly available and traded on.

Investors form unbiased
expectations about the
future

The price changes in accordance with the
information. If it contains good (bad)
news, relative toexpectations, the stock
price will increase (decrease).

Since expectations are unbiased,
there is a 50% chance of good or
bad news.

Next period

Stock price is an unbiased
estimate of thevalue of the
stock.

Current

Price
Assessment

No approach or model will allow us to
identify under or over valued assets.

Market
Expectations

Implications for
InvestorsReflecting the 50/50 chance of the news
being good or bad, there is an equal
probability of a price increase and a price
decrease.

Aswath Damodaran

2

The Basis for Price Patterns

1. Investorsare not always rational in the way they set expectations.
These irrationalities may lead to expectations being set too low for
some assets at some times and too high for other assets at other times.Thus, the next piece of information is more likely to contain good
news for the first asset and bad news for the second.
2. Price changes themselves may provide information to markets. Thus,
thefact that a stock has gone up strongly the last four days may be
viewed as good news by investors, making it more likely that the price
will go up today then down.

Aswath Damodaran

3

TheEmpirical Evidence on Price Patterns

Investors have used price charts and price patterns as tools for
predicting future price movements for as long as there have been
financial markets.
The firststudies of market efficiency focused on the relationship
between price changes over time, to see if in fact such predictions
were feasible.
Evidence can be classified into two classes

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