THE ROLE OF NEED FOR STRUCTURE IN TECHNICAL ANALYSIS AND HOW IDENTIFYING INFORMATION IN PRICE MOVEMENTS RAISES TRADERS’ CONFIDENCE

• Authors: Łukasz Markiewicz , Marcin Czupryna , Elżbieta Kubińska
• Languages of publication: EN

Abstracts

EN

Technical analysis (TA) is a tool believed to support investor’s investment decisions. Even if research has demonstrated that TA cannot be used to make systematic profits over a long time period, it could potentially bring psychological payoffs to its users in the form of enhancing their confidence. In an experimental study we show that: (1) chartists demonstrate overconfidence in TA usage, believing that they are better than they actually are in TA formation recognition, and that; (2) the act of naming an observed trend as a TA formation brings extra confidence to the chartist, regardless of whether this is a real TA sequence or a random sequence. Thus, both naming an existing TA formation as a TA formation and naming a random sequence as a TA formation result in greater confidence.Also, irrespective of the high popularity of TA among investors, there are marked individual differences in TA followers. In a questionnaire study, we demonstrate that declared positive attitudes toward TA correlate positively with high need for (cognitive) closure (as measured by the Need for Cognitive Closure Scale; NFCS), specifically, desire for predictability.

PL

Technical analysis (TA) is a tool believed to support investor’s investment decisions. Even if research has demonstrated that TA cannot be used to make systematic profits over a long time period, it could potentially bring psychological payoffs to its users in the form of enhancing their confidence. In an experimental study we show that: (1) chartists demonstrate overconfidence in TA usage, believing that they are better than they actually are in TA formation recognition, and that; (2) the act of naming an observed trend as a TA formation brings extra confidence to the chartist, regardless of whether this is a real TA sequence or a random sequence. Thus, both naming an existing TA formation as a TA formation and naming a random sequence as a TA formation result in greater confidence. Also, irrespective of the high popularity of TA among investors, there are marked individual differences in TA followers. In a questionnaire study, we demonstrate that declared positive attitudes toward TA correlate positively with high need for (cognitive) closure (as measured by the Need for Cognitive Closure Scale; NFCS), specifically, desire for predictability.

Keywords

EN

technical analysis; chartists; overconfidence; confidence; dubious data; cognitive closure

PL

technical analysis; chartists; overconfidence; confidence; dubious data; cognitive closure

• Publisher: Akademia Leona Koźmińskiego
• Journal: Decyzje
• Year: 2020
• Issue: 33

Dates

published

2020

online

2020-09-05

Contributors

author

Łukasz Markiewicz

author

Marcin Czupryna

author

Elżbieta Kubińska

Identifiers

DOI

10.7206//DEC.1733-0092.141