Forum Archive Index - March 2004

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi david

>
> Found a really great quote in the following paper:
>
> http://arxiv.org/abs/cond-mat/0209065
>
> "Individuals with rational expectations predict others’ behavior by
> focusing on their external incentives and constraints.  In contrast,
> individuals with adaptive expectations predict others’ behavior
> (including possibly the behavior of such an abstract "other" as the
> stock market) by extrapolating from the past".
>
> I posit that this is a fundamental definition of FA and TA?  (An the
> basic reason why the two approaches will never be reconciled).
>

No, I don't think you are quite on the right track.    With *my* kind of
fundamental analysis, studying the business, what ''other people' think
of it and where it is going doesn't matter and should be largely ignored. 

I believe there is this animal called a 'fundamental trader' out there that
trades on the news tickers.   Perhaps what you are describing is the
difference between a fundamental trader and a T/A trader.  Even then
not all T/A traders 'extrapolate from the past' as you put it.    Some only
work in the present and are 'reactive traders'.

SNOOPY


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