OUR INVESTMENT PHILOSOPHY

The intrinsic value of a company can be determined through the examination of its financial statements, the measure of its financial ratios, and by a comparative analysis of its peers. However, the market price of a company’s publicly traded stock is determined by supply and demand. At the heart of understanding how the two are reconciled is the study of behavioral economics and finance. This theory proposes that, contrary to the ideas popularized by the Efficient Markets Hypothesis (i.e. market prices reflect all information rationally and instantaneously), empirical evidence strongly supports the notion that markets are not rational, but instead are driven by fear and greed. In short, investor psychology plays an influential role. The discipline of technical analysis – by definition, the study of the supply and demand dynamics for publicly traded securities – offers a useful structure for observing and measuring these dynamics, and ultimately investor psychology. The subjective information gleaned from technical analysis can be effectively codified and systematized quantitatively to create algorithms oriented toward idea generation, performance attribution, and risk management, which are both objective, and repeatable.

 

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