Can You Beat the Market? Characterizing the Market and a History of Investment Methods in the 20th Century

This paper sheds lights on the three investment methods of the 20th century, which assume authority as financial knowledge. Challenging the notion of scientific evolution, it analyzes the way in which each method characterizes stocks and the stock market. Technical analysis, galvanized by the technological innovation and the emergence of mass investment society in the US, sought to exploit the regular trend of stock prices to generate profit. Security analysis, in contrast, pays attention to the intrinsic value, as opposed to the market price, to find out a firm with stable potential earnings. While these two methods assumed the capacity of professional money managers to beat the market, the random walk recognized the opposite. Owing to the efficiency of the market, the new method presented a method which paid attention on the correlation between individual stocks and the whole portfolio. Given the idea that each method directs the flows of capital, this paper also explored the political economy of investment methods.

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