Charles Dow was concerned with managing returns in a context of risk. His process required identifying and confirming trends. He was aware the market trends were influenced by economics as well as behavioral biases. Therefore he required that up trends be confirmed in order to be more likely to persist. Dow’s Theory of Confirmation created a framework for making investment decisions. This paper takes Dow’s concept and models a modern version of Confirmation which demonstrates superior risk-adjusted returns.
Carson Dahlberg CMT