Modest and soft-spoken, Shareen Joshi seems an unlikely person to be making big waves in financial markets theory. Yet Joshi, who graduated Phi Beta Kappa from Reed last May with an interdisciplinary major in mathematics and economics, is on her way to doing just that.
In her senior thesis, she posed a provocative question: is technical trading a menace to the stock market? It seems that the answer, in a word, is yes. But Joshi arrived at her conclusion by using an elegant computer model to test her theories, running thousands upon thousands of computer simulations of investors' stock market behavior as they attempted to outsmart the market.
Technical trading involves trying to identify historic stock price patterns, using that information to predict future stock prices, and then buying and selling stocks based on those predictions. One example of technical trading is known as momentum investing, in which investors buy stocks whose prices are rising and selling ones whose prices are falling, regardless of their intrinsic value. It represents a totally different approach to investing than traditional financial analysis, which bases trading decisions on such fundamentals as price-earnings ratios and the economic outlook for individual companies and their industries.