Magic numbers in the Dow
and Richard Ramyar
Cass Business School, City of LondonSeptember 2006
There is a widespread belief in financial markets that trends in prices are arrested at support andresistance levels that are to some degree predictable from the past behaviour of the price series. Herewe examine whether ratios of the length and duration of successive price trends in the Dow JonesIndustrial Average cluster around round fractions or Fibonacci ratios. We identify turning points byheuristics similar to those used in business cycle analysis, and test for clustering using a block bootstrap procedure. A few significant ratios appear, but no more than would be expected by chancegiven the large number of tests we conduct.
: Technical Analysis, Stock Market, Forecasting, Anchoring, Stationary Bootstrap
: C15, C53, G10
Roy Batchelor, HSBC Professor of Banking and Finance, Sir John Cass Business School, City of London, 106 Bunhill Row, London EC1Y 8TZ, United Kingdom. Telephone: +44 207 040 8733, fax+44 207 040 8881 E-mail:
Richard Ramyar, PhD Researcher (2002-2006), Sir John Cass Business School, currently of RamyarIntegrated Consulting. Telephone: +44 207 870 3185 E-mail:email@example.com