Stephen Brown’s Research on the Dow Theory is Featured

NYU Stern Professor Stephen Brown’s research on the Dow Theory was featured by the Wall Street Journal’s, Market Watch. Brown, along with two finance professors, William Goetzmann of Yale University, and Alok Kumar of the University of Miami analyzed over seventy years of market forecasts from 1930-1997 in order to shed more light on the Dow Theory and its focus on market-timing.

They found that, over the nearly 70 years from 1930 through the end of 1997, the Dow Theory beat a buy-and-hold by an annual average of 4.4 percentage points per year…The professors gathered all the market-related forecasts issued in the first three decades of the last century by William Peter Hamilton, the originator of the Dow Theory. They fed those forecasts into a neural network, a type of artificial-intelligence software that can be “trained” to detect patterns. And they then used that network to issue buy and sell signals between 1930 and 1997.

Brown’s research was referenced by Market Watch, in light of Friday’s close where some argued that the Dow Theory prompted a buy signal. The author writes that while most aren’t sold by the Dow Theory’s success in market-timing, Brown et al’s research shows that it might be worth watching current Dow Theorists’ interpretations.

Interested in Professor Brown’s research? Join us for a complimentary Webinar tomorrow at 11amEST on The Importance of Due Diligence for Institutional Fund Investors.

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