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To: Chris who wrote (44984)	5/27/1998 1:51:00 PM
From: Chuzzlewit	Respond to of 176387

Chris, you raise the key point. Market risk is non-diversifiable. If you understand that concept you understand one of the key ideas in MPT. Ideally you would create an efficient portfolio that accomplishes two things: 1. Diversify away as much of the "diversifiable" (business) risk as practicable -- generally around 12 issues is considered reasonable compromise; 2. Adjust the level of market risk you are willing to assume by investing on a basket of stocks such that the basket has a beta you find acceptable. But there are major problem with this approach. Betas are not stable, and they may not in fact even measure risk. I read one suggestion that the best measure of risk is the std deviation of analysts earnings forecasts. I appreciate your honesty in response to my challenge for proof. I would hope that you understand that I'm serious in wanting to see statistical proof of TA before I would seriously consider it. There is some good evidence on the other side of the argument questioning whether TA works. The problem is you can never prove a negative. How can you prove that Santa Clause doesn't exist? So logically, the onus is on the adherents to show that it works. Claiming that it is an art begs the question. TTFN, CTC