Ep. 250: Hersh Shefrin and Arvid Hoffmann Interview with Michael Covel on Trend Following Radio

Synopsis: Michael Covel speaks with Hersh Shefrin and Arvid Hoffmann on today’s two-part podcast. Hersh Shefrin has done pioneering work in behavioral finance and is the author of Beyond Greed and Fear. Hoffmann is a colleague of Shefrin. He is a Professor of Finance at Maastricht University in the Netherlands. Shefrin and Hoffmann’s paper, Technical Analysis and Individual Investors, came out February 2014. The paper is concerned with short-term technical analysis and retail traders. Covel and Shefrin discuss how Shefrin came to know that behavioral finance was his path; the two-system framework; the connection to behavioral and eating disorders; the disposition effect; when emotion and reason are in conflict; “transferring your assets” vs. “selling a loss”; distinguishing between rules and discretion; how we stick with rules for ourselves given the context of our humanity; the psychological pitfalls of the 2008 financial crisis; the inevitability of market crises; Minsky and Keynes; the psychology of Keynesian economics; and human ideas surrounding uncertainty. With Arvid Hoffmann, Covel discusses the paper Technical Analysis and Individual Investors; the inspiration for the paper; Hoffmann’s definition of technical analysis; the narrow focus of the paper to short-term trading; technical analysis and trend following; “invest as if the market was efficient”, and “restrict your attempts to beat the market”. Want a free trend following video? Go to trendfollowing.com/win.

hersh shefrin

arvid hoffmann

2 thoughts on “Ep. 250: Hersh Shefrin and Arvid Hoffmann Interview with Michael Covel on Trend Following Radio

  1. The factual findings of the cited paper are not surprising. It is not surprising at all that untested or untestable technical indicator trading systems employed by retail investor laypersons make no profit in the long run. A contrary finding would be the surprise, wouldn’t it?

    Unfortunately, as it does not control for the scientific awareness of the subjects, this paper provides no insight about how well or poorly long term, short term, or any valid trading system performs in the markets when competently validated and executed.

    At best this paper only says that some Dutch retail equity/option traders before 2006 were easily seduced by impressive looking technical gimmicks that they didn’t validate either by reason of scientific incompetence, carelessness, or diagnosable mental illness.

Comments are closed.