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When technical analysis fails

Arvid Hoffman of Maastricht University and Hersh Shefrin of Santa Clara University in California have found that investors who say they use technical analysis either exclusively or in combination with other strategies have monthly returns which are 0.5 per cent lower than other investors. This is equivalent to 6 per cent per year. This finding is based on a survey of over 5,000 Dutch investors.

These losses come despite the fact that users of technical analysis are more likely than other investors to hold value stocks and are less likely to bet against momentum stocks - two things which should have improved their relative performance.

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