Abstract

http://ssrn.com/abstract=1296408
 
 

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The Dow Theory: William Peter Hamilton's Track Record Re-Considered


Stephen J. Brown


New York University - Stern School of Business

William N. Goetzmann


Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Alok Kumar


Yale University

February 1998

NYU Working Paper No. FIN-98-013

Abstract:     
Alfred Cowles' (1934) test of the Dow Theory apparently provided strong evidence against the ability of Wall Street's most famous chartist to forecast the stock market. In this paper we review Cowles' evidence and find that it supports the contrary conclusion - that the Dow Theory, as applied by its major practitioner, William Peter Hamilton over the period 1902 to 1929, yielded positive risk-adjusted returns. A re-analysis of the Hamilton editorials suggests that his timing strategies yield high Sharpe ratios and positive alphas. Neural net modeling to replicate Hamilton's market calls provides interesting insight into the nature and content of the Dow Theory. This allows us to examine the properties of the Dow Theory itself out-of-sample.

Number of Pages in PDF File: 45

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Date posted: November 7, 2008  

Suggested Citation

Brown, Stephen J. and Goetzmann, William N. and Kumar, Alok, The Dow Theory: William Peter Hamilton's Track Record Re-Considered (February 1998). NYU Working Paper No. FIN-98-013. Available at SSRN: http://ssrn.com/abstract=1296408

Contact Information

Stephen J. Brown
New York University - Stern School of Business ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0306 (Phone)
212-995-4233 (Fax)
William N. Goetzmann
Yale School of Management - International Center for Finance ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-432-8931 (Fax)
HOME PAGE: http://viking.som.yale.edu

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Alok Kumar
Yale University ( email )
New Haven, CT 06520
United States
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