Joshi concluded that technical trading does indeed pose a threat to the market, by leading to greater stock price movement, higher trading volume, and most importantly, less overall wealth. "It moves the market to an equilibrium where agents [investors] are collectively worse off than they would be in a regime with no technical trading," she wrote.

Though it is carefully couched in precise terms, Joshi's conclusion could make waves in academic circles, according to her two faculty advisers.

"It's not a matter of pushing the trail a little bit farther but of developing an entirely new trail," observed associate professor of philosophy and humanities Mark Bedau. Her contribution to the field of academic finance is "quite substantial," said economics professor Jeffrey Parker. "She has demonstrated that the existence of technical trading leads to a socially sub-optimal equilibrium." What makes Joshi's work so exciting, according to her professors, is that it demonstrates for the first time just why technical trading is attractive to investors, even though conventional economic theory maintains that it offers investors no real advantages, and helps to explain why it makes markets so volatile.

Her thesis was an unusual collaboration between a student and two faculty advisers that began her junior year, when Bedau introduced her to new methods of studying how complicated collective behavior can arise out of the simple interactions of individual agents. For her senior thesis, Joshi carried her studies further by using a sophisticated model developed at the Santa Fe Institute, a New Mexico think tank with which Bedau is loosely affiliated and where she is currently a research assistant.

Initially, all she had was "a big tool that was in search of a problem to solve," noted Parker. So he helped her to find the problem: determine the effects of technical trading on stock markets and investigate why it is so widespread.

"No one had ever looked at that kind of question in a model like this," noted Bedau. "What she did was to pose a new question, and she came up with a dramatic answer."







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