Investments, tenth edition

   Trends and Corrections 

 Much of technical analysis seeks to uncover trends in market prices. This is in effect a 

search for momentum. Momentum can be absolute, in which case one searches for upward 

price trends, or relative, in which case the analyst looks to invest in one sector over another 

(or even take on a long-short position in the two sectors). Relative strength statistics are 

designed to uncover these potential opportunities. 

  

24

 Mark Grinblatt and Bing Han, “Prospect Theory, Mental Accounting, and Momentum,”  Journal of Financial 

Economics  78 (November 2005), pp. 311–39. 

  

25

 S. Gervais and T. Odean, “Learning to Be Overconfident,” Review of Financial Studies 14 (2001), pp. 1–27. 

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7/17/13   3:46 PM

7/17/13   3:46 PM

Final PDF to printer

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