I am often asked why I don't believe in trends despite the great profits of some selected trend followers. The main reason is that standard measures in statistics, like the serial correlation coefficient or runs or Goodman tests for m dependent time series, are designed to test trends. I have not found many market series that show consistent departures from randomness on such tests. Nor, more important, have I ever found a series that looks like it has a trend, whether it be a moving average or lagged momentum type, that doesn't show some serious evidence for non-randomness as measured by the above mentioned tests. VN

My question regards the last sentence. Isn't this interesting? That is to say, if you tested runs at the craps table, with fair dice, you would find no evidence of non-randomness, and discern that you couldn't make money. But if there was evidence for non-randomness, wouldn't that imply an opportunity to make money?


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