Should investments professors join the “crowd”

Just like the market which has its bulls and its bears, investments has its fundamentalists crowd and its technicians crowd. The academic finance profession must wake up and realize that investing is no longer driven solely by fundamental and statistical analysis. While as a profession we believe in and teach the fundamental investment subjects such as CAPM or EMH, we also realize the need to examine ways to explain the 80 per cent of the variability of stock returns not explained by the fundamentals. In addition to the fundamental investment subjects an increased exposure to both behavioral finance and the psychology of financial markets is absolutely necessary to increase the understanding of how and why stocks move. Just as the bulls need the bears, fundamentalists need technicians. Behavioral finance, crowd psychology, and the psychology of financial markets are the underpinnings of technical analysis. Western technical analysis predates CAPM and EMH by decades, if not more, tracing its roots back to Charles Dow founder of Dow Jones.