Market Research Methods: evidence-based analysis

01

Before you start: research questions and the evidence ladder

In simple words

If one friend says "this shortcut is faster", that is a story. If you time the shortcut ten times, that is a test. If ten different people time it on different days and get the same answer, that is strong evidence. Research is about knowing which of these you are looking at.

Key facts

Education only. This lesson is about judging claims, not about choosing trades.
Before this course: Testing Chart Ideas (course 5.10.3). You know how to test one idea honestly. Now you learn to weigh many pieces of evidence.
The skeptical starting point. Finance research often starts from the idea of market efficiency described by Eugene Fama in "Efficient Capital Markets: A Review of Theory and Empirical Work" (Journal of Finance, 1970). In its "weak form", the idea is that past prices are already reflected in today's price, so past prices alone should not give a reliable, repeatable edge after costs. You do not have to believe it. It is the null that technical-analysis research has to beat.
Three kinds of question:
Descriptive: "How often did a 50-day high happen in market X from 2010 to 2020?"
Predictive: "Did returns after a 50-day high differ from returns on other days?"
Causal: "Does a 50-day high cause buying?" Price data alone rarely answers causal questions. Say so when you cannot.
A framed question in this course has five parts: Market, Rule, Comparison (baseline), Outcome (what you measure, after costs) and Period. If any part is missing, the question is not ready.
The evidence ladder (from weakest to strongest):

Rung	Example	Main weakness
1. Story or screenshot	"Look at this chart where it worked"	Chosen after the fact
2. Seller's backtest	A course advert with a rising line	Conflict of interest, unknown number of tries
3. Your own pre-written test	Course 5.10.3 capstone	One analyst, one data set
4. Peer-reviewed study	A journal article with methods	Can still be data-snooped or out of date
5. Independent replication	Other researchers re-test with new data	Fewer exist
6. Review of many studies	A survey that weighs all studies and their quality	Only as good as the studies it includes

Higher rungs are stronger, not certain. Even rung 6 describes the past.
Failure mode: treating many low-rung claims (many screenshots, many influencers) as if they added up to a high-rung one. A thousand stories are still stories.

Step by step

Find one claim about a chart pattern or indicator (an advert, a post or a book). Copy it word for word.
Write which rung of the ladder it is on, and why.
Rewrite it as a framed question with all five parts: Market, Rule, Comparison, Outcome, Period.
Label the question descriptive, predictive or causal.
Write the weak-form efficiency null for your question in one sentence ("After costs, returns after this rule are no different from ...").
Write what evidence would move the claim up one rung.
Check: your question has all five parts, and you can explain in one sentence why the original claim was on its rung.

Watch on YouTube

Evaluating a source's reasoning and evidenceKhan Academy · YouTube · youtube.com

Fundamental analysis vs technical analysisCME Group · YouTube · youtube.com

Videos by other creators on YouTube, for reference. They are not made by or affiliated with The Future Market.

LESSON 01Before you start: research questions and the evidence ladder

LESSON 01 / ANIMATED LESSON / AI VOICE00:00 / 01:00

Voice

Read the video script

[Host] "A story, a test and strong evidence are three very different things."
[Text on screen: Market, Rule, Comparison, Outcome, Period] "First, frame the question: which market, which rule, compared with what, measured how, and over which period."
[Screen: the evidence ladder from story to review of many studies] "Then place the claim on the evidence ladder. Screenshots sit at the bottom. Independent replications and careful reviews sit near the top."
[Text on screen: weak-form efficiency = the null to beat] "The skeptical starting point: past prices alone should not give a repeatable edge after costs. Research has to beat that."
[Host] "Education only. Higher on the ladder means stronger, never certain."

Try it now

Take three claims you have seen about charts. For each, write its rung, a framed five-part question and what would move it up one rung. Do not place any trade.

ClaudeStuck? Copy a ready-made prompt for Claude

Copy this, open Claude, paste it, and Claude will walk you through the lesson step by step.

For a grown-up: Claude is for adults (18+). Copy this, paste it into Claude, and use the answer to explain the lesson to your child.

I'm learning "Market Research Methods: evidence-based analysis" on The Future Market. Lesson 1: "Before you start: research questions and the evidence ladder".

What the lesson teaches:
- Education only. This lesson is about judging claims, not about choosing trades.
- Before this course: Testing Chart Ideas (course 5.10.3). You know how to test one idea honestly. Now you learn to weigh many pieces of evidence.
- The skeptical starting point. Finance research often starts from the idea of market efficiency described by Eugene Fama in "Efficient Capital Markets: A Review of Theory and Empirical Work" (Journal of Finance, 1970). In its "weak form", the idea is that past prices are already reflected in today's price, so past prices alone should not give a reliable, repeatable edge after costs. You do not have to believe it. It is the null that technical-analysis research has to beat.
- Three kinds of question:
- Descriptive: "How often did a 50-day high happen in market X from 2010 to 2020?"
- Predictive: "Did returns after a 50-day high differ from returns on other days?"
- Causal: "Does a 50-day high cause buying?" Price data alone rarely answers causal questions. Say so when you cannot.

The exercise I'm working on:
Take three claims you have seen about charts. For each, write its rung, a framed five-part question and what would move it up one rung. Do not place any trade.

I'm stuck. Please:
1. Explain the main idea in plain, simple words with one everyday example.
2. Walk me through the exercise one small step at a time. Ask me what I've done so far before giving the next step.
3. Don't just give me the final answer. Help me do it myself, and check my work when I share it.
4. This is for learning only. Remind me to check with a licensed professional before I make a real decision about my own money, health or legal situation.

I'm a parent helping my child (about 8 years old) with a lesson called "Before you start: research questions and the evidence ladder" from the course "Market Research Methods: evidence-based analysis".

Here's what the lesson says:
If one friend says "this shortcut is faster", that is a story. If you time the shortcut ten times, that is a test. If ten different people time it on different days and get the same answer, that is strong evidence. Research is about knowing which of these you are looking at.

The activity:
Take three claims you have seen about charts. For each, write its rung, a framed five-part question and what would move it up one rung. Do not place any trade.

Please explain this so an 8-year-old understands: short sentences, a fun everyday example, and no hard words.
Then give me 3 simple questions I can ask my child to check they understood, and a way to do the activity together, one tiny step at a time.
Keep it general and educational. This is not advice for a real situation.

Open Claude

Sources

Fama, E. (1970), "Efficient Capital Markets: A Review of Theory and Empirical Work", Journal of Finance 25(2): econpapers.repec.org/RePEc:bla:jfinan:v:25:y:1970:i:2:p:383-417
Park, C.-H. and Irwin, S. H. (2007), "What Do We Know About the Profitability of Technical Analysis?", Journal of Economic Surveys 21(4): econpapers.repec.org/RePEc:bla:jecsur:v:21:y:2007:i:4:p:786-826

My notes

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