Before Computers Ruled Finance

Ed Mendel first met Ned Davis in the 1970s at J.C. Bradford & Company, a traditional broker dealer. The 1970s-bear market was in full throat; Mendel found there was an appetite for Davis’ insightful technical analysis among institutional clients as a risk management tool.

The two became intrigued by the idea of analyzing the markets using a new-fangled technology called “computers” to help analyze market data. At the time, charting was done by hand and quantitative analysis was an academic endeavor, primarily consigned to university mainframes.

Very few realized that computers could be used to create and clean market databases that would allow a far more in-depth analysis and charting of various assets classes. When they asked for a $30,000 computer in 1979, their boss turned them down. Not too long afterwards, Ned Davis Research, the institutional quantitative research firm, was born. Davis did the number crunching and Mendel developed the business model around technical analysis services. They created one of the largest stock and bond research followings among the institutional investors.

Mendel is now retired, but is active as a philanthropist and part-owner of the Atlanta Falcons.

Some of his favorite books are referenced here; transcript is here.

You can stream/download the full conversation, including the podcast extras, on BloombergiTunesOvercast, and Soundcloud. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.

Next week, we speak with Cornell Psychology Professor Tom Gilovich, author of “How We Know What Isn’t So: The Fallibility of Human Reason in Everyday Life,” and author of numerous innovations and discoveries in the field of human biases and heuristics.

 


 

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