A Comparison Between UK and Belgian Culture

There are clear differences between Belgian and British attitudes that emerge in all areas of life. For example, the delicacies of Belgium being created through the fusing of least three communities, its historical vulnerability compared to neighbouring countries and its need to trade internationally have all contributed to forming the attitudes of its people, their structures and institutions. As a result, authors such as Hofstead are able to distinguish and attempt to qualify why countries such as Britain are more individualist and relate it to areas, such as Britain’s imperialist past in order to reveal patterns. This report is divided into three areas, politics and economics; education and employment; and society in order to allow for an overview of the countries’ differing cultures and relations to institutions.

Politics and Economics

The complexity of Belgium’s consensus political system helps to balance the needs of both the Wallons and the Flemish. This would be considered to be a more low power distance political system than Britain’s Westminster model, which is based on one party forming the executive. However, this appears to be contrary to Hofstede’s conclusions, either from an underestimation of the effects of institutions (or political institutions) or it gets accommodated by other aspects of culture. The first reason is more likely, as the political framework is designed to balance the needs of Flemish and Wallon interests and disperse pressures which may attempt to divide the country.

Britain is considered the most individualist of all European countries, partly as a result of left wing socialism being drowned out by Thatcherism in the 1980s and an acceptance by the Blair government of the importance of a certain level of inequality in order to encourage economic growth throughout the economy. This continuation under New Labour, a left wing group too frightened by their long absence outside government to aggressively reduce income inequalities, as it would be contrary to what the general population (or at least the swing voters) have become used to under the right wing economics of the 1980s. The reduction in people’s reliance on the state has also reduced the power distance in Britain, as people were forced to support themselves.

In terms of income distribution Belgium is more collective than Britain. Similarly, there is a lot lower difference in wages between the highest and lowest paid workers compared to in England. For example, the highest rates of personal income tax is 65.6% and corporate income tax is 40.2%, where in England it is 60% and 35%.[1]

Belgium’s military police force, although not as extreme as other forces does highlight a more fearful side of Belgian society compared to the moderate British police force. The larger groups of patrolling police officers compared to Britain are also armed, both as a signal of deterrent to would be offenders and to reassure the general public. Judging by the relatively lower levels of crime in Belgium compared to Britain it could be case of departmental capture, whereby the police have argued for more officers than necessary to increase their influence beyond what is economically optimum. However, it could also be the case that Belgian society has a more feminine stance that the benefits of heavy policing outweigh the economic costs of policing (albeit through using one of the more traditionally masculine institutions possible).

However, the Belgian officers seem reasonably tolerant and are out in smaller numbers in larger occasions compared to in Britain. Although it should be mentioned that the ease of use for football fans to take over Bourse to celebrate their victories during the World Cup and the calm of the police officers at the spectacle is probably more to do with Britain’s higher rate of hooliganism than differences abroad.

Britain is undoubtedly more short-term than Belgium politically and economically. The first past the post system encourages governments to fine-tune the economy and policies before elections, even to the detriment of the country in order to get elected. Although not being able to comment in depth, Belgium’s consensus based system should theoretically make it less urgent for governments to ‘fiddle the books’ as much as in Britain.

Although also closely linked with uncertainty avoidance the UK’s reasons to refuse to join the Euro and participate as much in European affairs highlight a disgust at making sacrifices for potential gain in the future. This is not such a problem for Belgium, as the country’s need for consensus as a result of its own fragility culturally and size compared to neighbouring countries makes it more prepared to negotiate and make sacrifices in order to guarantee future security, which can help to explain why Belgium is one of Europe’s most pro EU countries.

Conclusions

Britain and Belgium’s political and economic institutions show clear differences in approaches between the two countries. The most important piece to examine these differences is Britain’s shedding of once core values during the long Conservative government of the seventies created huge repercussions which affected many areas from civic pride, investment decisions favouring short term growth to longer term restructuring and the fear of engagement in European affairs. Belgium’s more relatively stable political system has not experienced such shocks in recent decades, which when combined with its smaller country status internationally helps to explain why more traditional values, such as favouring more cooperation both domestically and internationally and more short-term sacrifices in order to make greater gains in the future.

Education and Employment

The most substantial differences between the studies offered in Exeter and Vlekho is that one is a university and the other is a business school. Whereas Exeter University is more of the traditional academic structure which focuses students’ attentions on a small amount of topics to encourage speciality Vlekho encourages students to know a shallow amount on a larger range of topics to gain a broader experience. As a consequence it is often difficult to make any broader comments about the two countries, although different attitudes do emerge.

In Britain there are most lectures contain hundreds of students and class participation is low (i.e. low power distance). This is compensated by small tutorial groups ranging from sizes usually between 10 and 20 per class which is focused on discussion.

Vlekho has a structure which offers medium sized lectures, usually averaging between 30 and 70 students and no tutorials. Discussion tends to be highly welcomed, although many Belgian students have admitted finding it difficult adjusting to this new structure of teaching at Vlekho. Personally, I have had problems as a result of one Vlekho professor expecting too much a degree of compliance than expected of me both from at my home university and of his peers in Brussels. This might suggest that perhaps the majority or at least some of the students (and some professors) have higher power distances than the revised smaller class size Vlekho educational structure[2] and probably more in line with the British educational structure.

England’s university structure is focused on private study. Courses are graded according to a combination of essays, presentations and exams. Vlekho includes these as well, of course. However, more recently there has been a growing importance on making the education process closer to the environment of the workplace.

One of the developments resulting was that group projects take a higher significance than more individual assignments. Now students’ grades are dependent on the group’s success in projects and not their own personal contribution. This is collectivist thinking even extends to peer evaluation on certain courses which can be the difference between a student getting a respectable grade or failing (no matter his contribution in certain circumstances). In English education is would be highly unorthodox and would be dismissed as blurring how the teacher would understand each individual students understanding of the course.

In both systems there is a different method of encouragement in higher education. In England the system is developed so that individual effort (or laziness), through working on projects alone is more easily distinguished. In Belgium, on the other hand the teacher’s assessment is focused more on cohesion within the group, rather than on individual strengths.

The results structure of Vlekho is different to Exeter Universities in terms of their grade weighting. In England grades are offered as a percentage, with 40% being the lowest pass grade and 70% being the top grade. Over 60% on average is required in order to get an acceptable strong degree level. Vlekho’s more collective grading system results in the pass level being 10 out of 20 (50%) and it being much harder for students to get very high grades. This is because the emphasis, as in the Netherlands is not in isolating and rewarding the more outstanding students but ensuring that all the students complete the minimum. From personal experience I have not come across any students with aspirations to getting high grades, as most people are more concerned with merely passing.

Vlekho’s higher minimum pass rate than in Britain could highlight the need to weed out the less capable students, such as making it hard to pass accounting exams to ensure that accountants are highly accomplished rather than knowledgeable in their profession.

English universities tend to be more flexible than Vlekho’s approach, which although it has declined in the last few decades permits more free developmental time than Belgian higher education. This is clearly differentiated by the existence of a large Union structure in English universities, which supports the creation of societies. In Vlekho there really only exist Pro Gaudio and Cleopatra, which are effectively drinking societies.

The Belgian system of making students sit more modules and takes multiple styles of evaluation (such as exams, presentations, orals, etc..) should ensure that the students results are less prone to error and bad luck than English exams, which rely on big exams to determine results (and even future careers).

However, it has to be noted that societies and groupings do exist but outside the institutions of education, serving the needs of society rather than the bubble of university. However, it is difficult from experience to qualify the differences in these post education differences.

Belgium invests a considerable amount more per student than in Britain in education, as it is considered that the benefits both in terms of future tax revenue as a result of a more productive workforce and net society gains as a result of a more conscientious population.

From my experience working at Den Bisnis I have noticed differences from various forms of employment (both skilled and unskilled) to English employment. One of the most noticeable was the reward structure. Most bar professions involve tips. When I worked in a coffee shop it was pooled every month, as the automation involved meant that one customer would be served by at least one employee. In Den Bisnis there is only one barnman serving, normally for half the day. Despite this tips are pooled across all employees for the year, so that it meant no difference how hardworking an employee is or popular he is with the customers he will still receive the same return as the rest. Not only this but the money is actually spent on one day out, where all the barmen go drinking for the whole day. This provision, although unlikely to be representative of Belgium in general and all forms of work does highlight subtle cultural differences in the way table service operates between countries.

Belgian employees tend to be more professional than in Britain. Although not directly celebrated a higher minimum is expected, which appears to filter through most areas of society, even down to the kebab shop seller, who makes the effort in most cases to maintain a level of care. This is partly as a result of pride in their output, as a consequence of Belgium’s trading history and a greater sense of responsibility.

Unfortunately in Britain effort is looked down upon, almost as a form of cheating. The professional slacker is becoming more of a major problem in companies, with an increasing number of employees preferring to cheat than contribute to their system, a negative effect of the individualist and masculine business environment.

On the other hand, British customer service is of a lot higher standard, as the Belgian customer-employee relationship is because of its falsity and having been less exposed to ideas of American human resources and marketing.

In the workplace, despite the English habit of people hiding their emotions through degrees of sarcasm and protocol there is a greater degree of criticism of peers and authority figures than in Belgium. Criticism does exist in Belgium but does not tend to get told directly to the people involved but rather as a complaint to confidents, as a result of a lower power distance existing within the workplace.

Conclusion

The main between British and Belgian education and working practices is the level of individualism which affects the assessment of people and consequentially furthers patterns of behaviour through rewards or punishment. For instance, as a business school Vlekho has been keen to adopt many US and UK originated ideas. Despite this there are hidden characteristics which exist to encourage more conscientious practices. In the UK this is felt to be less important, as there are felt to be greater benefits from encouraging people to compete more against each other. One concern for Britain is that the emphasis on success through individual and masculine methods is that its incentives often encourage underperformance and cost cutting, which helps to create negative effects in the workplace and society in general.

Society

In Britain there is a lot less respect for strangers and family ties than in Belgium. These low power distance characteristics can be seen in many forms, such as youths hanging around street corners intimidating passers-by. This is regarded as part of the ‘Decline In British Values’ that has been deteriorating, partly as a result of the rise of individualism under the Thatcher government. Although rough areas are mentioned by Belgians there tends to not be any problems on the streets, although I do hear personal stories from female friends of mine who have experienced problems with Arab youths causing them grief. However, I haven’t been witness firsthand enough to comment sufficiently how large this problem is and it would certainly not be any worse than in England.

Belgium’s (especially Brussel’s) influx of Turkish and Moroccan immigrants are posing newer problems, as they are less willing than previous southern European migrants to assimilate into Belgian culture, as well as increased cultural differences to bridge. As a consequence there is a greater sense of caution towards them because of a fear of the unknown. This has happened in England (especially London) previously and although it is difficult to determine which created a greater degree of uncertainty it has to be mentioned that it does occr in both countries but that England is at a different stage.

A clear distinction can be made by different controversial issues that have been settled and considered the norm in some countries and others which are still shocked by them. Issues on drugs, sexuality and pluralism appear almost on a sliding scale, with the more feminine Netherlands accepting many issues, Belgium tolerating some through non policing and Britain tending to assume that society’s fabric will unwind if certain issues are treated softly.

In Belgium I find it amusing how all Belgian’s seem to return every weekend without fail to see their parents. British students tend to embrace their freedoms a lot more, seeing it as a further step towards independence. It appears that Belgian’s links towards their families are stronger and that British students tend to prefer to cut some of their collective bonds to have more freedom and discover newer sides to themselves at university.

One of the most interesting differences between British cities and Brussels is the relative lack of advertising boards. In Brussels these are then predominantly for cultural events, highlighting a more feminine outlook, as the cultural prospects of the street are favoured over marginal profitability. However, a large billboard recently constructed by Botanique by a British advertising company may be heralding a shift in brand advertising in Belgium. Normally, the majority of company advertising has been through sponsoring cultural events, so as to be included in on street posters.

Belgian architectural rules give preference to designers ideas, preventing other designers being able to replicate features in other buildings. As a result there is only one street in Brussels where the houses are the same and that is only on one side of the street. As a consequence of a lack of uniformity there is greater architectural spontaneity of design on a single street (albeit quite subtly), in terms of size, materials and architectural features, which would highlight an individualist mindset. However, on the other hand this is also coupled with both architects and town planners’ desires to incorporate future buildings in line with existing structures, especially in height and proportion in order to create more of a continuous theme, even in cases where the materials and periods are different. The result is a city where the buildings, although reflecting individual preferences and budgets is still restrained by the collectivist notions of previous styles and the local neighbourhood.

Brussels public works such as metros or government buildings tend to reflect their attitude that it is easier to plan and prepare for future demands and capacity rather than constantly having to deal with expedients. An interesting comparison would be comparing the size of the metro stations in Brussels to London’s Underground. In the Belgian case the stations are built so that capacity will not need to be enlarged in order to deal with future population sizes. In London all stations tend to be overcrowded and usually over capacity, with stations often being closed temporarily, as it would be unsafe to allow more people inside. Although Brussels’ transport is overcrowded it is merely a case of the pricing structures with the companies running them and not providing enough carriages platforms could easily accommodate twice the amount of carriages than currently offered.

Conclusion

Belgian society’s open-mindedness and collectivism reverberates especially in Brussels, reflected in the diverse range of communities, beliefs and architectural ideas that exist. Belgium’s beliefs towards inclusively is being challenged by minorities more prepared to be distinct than previous generations. British society, which had experienced similar immigration has overcome most of these questions over time, partly as an unmentioned debt to these as a result of imperial aggression in the past and a homogenising idea of what it is to be British. This final reason although speeding up the process of integration results in the island paranoia of immigrants intentions never disappearing, even with descendents eventually excluding future immigrants to a small extent.

General Conclusions

In terms of marketing potential the variations in culture as a result of subtle characteristics of values, rituals, heroes and symbols between the UK and Belgium require slightly different approaches to a company or organisation promoting itself. For example, a commercial which emphasises more individualist values, such as the go getting male who gets the girl over his mates at the nightclub because of some accessory would be more successful at tapping into UK instincts more than in Belgium. Similarly, an advert showing the potential for play as a result of an accessory within a group would be more successful to Belgian audiences. However, this observations still need to be taken with a pinch of salt, as Belgium and UK differences are fairly close to each other on a global scale, as European characteristics will be much close compared to characteristics in other countries. International comparisons between Belgium and Japan would reveal Belgian’s to be more independent, for example. On the other hand, there are clear differences between the UK and Belgium, enough to benefit any marketers who want to gain the most exposure for their products.

This report was written by Jonathan McHugh in August 2006

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[1] OECD in Figures Statistics on the Member Countries, 2002.

[2] Although I suspect in the case of my professor it is more a comedown from previously working high up in business, where he was the absolute authority.

An Introduction to Technical Analysis

1. General Overview

Portfolio Management is the process of choosing investments that are suitable for an account, bearing in mind an identified objective for the account but operating within defined risk parameters. A Portfolio manager should design a portfolio that will achieve the desired rate of return while keeping the risk within an acceptable level. There are two main types of methods used to analyse and predict the performance of stock. These types fall into two categories: Fundamental Analysis and Technical Analysis. In this paper we will focus solely on Technical Analysis.

Technical Analysis is the forecasting of future stock movements by using numerical series generated by market activity to look for peaks, bottoms, trends, patterns and other factors affecting a stock's price movement in order to make buy/sell/HOLD decisions. It can be applied to stocks, indices, commodities, futures or any tradable instrument for which price is influenced by the forces of supply and demand. In this case, the prices refer to combinations of the open, high, low or close for a given security in a specific time frame.

Technical Analysis does not result in absolute predictions about the future, but it can help investors anticipate what is "likely" to happen to prices over time. It is primarily, though not solely conducted by studying charts that show the price movement of a stock over time. There are hundreds of different patterns and indicators used by investors, this paper will close up on some of them.

example of bar chart

Technical analysis does not mean to analyse the reasons why there has been a price movement in a certain stock. Instead, it focuses in whether it has moved in a particular direction and tries to find a chart pattern that can be useful for forecasting. Followers of this method believe that you can take advantage of the market and make profit by what they call “trend following”, meaning that if the price rises, they expect it to continue rising and vice versa.

Once a trend is identified, it is believed that it will continue until something happens to change the trend, and until this change occurs, price levels are predictable.

3. Basis of Technical Analysis[1]
The Dow Theory, which is a theory based on the writings of the co-founder and editor of Dow Jones, Charles Dow, laid the foundations of what later became modern technical analysis.

Ralph Nelson Elliott based his studies on the Dow Theory and in the late 1920s came up with The Elliott Wave principle. He discovered that stock markets do not behave in a chaotic manner, but that markets move in repetitive cycles, which reflect the actions and emotions of humans caused by exterior influences or mass psychology. The patterns that Elliott discovered are built in the same way. An impulsive wave, which goes with the main trend, always shows five waves in its pattern. On a smaller scale, within each of the impulsive waves of the before mentioned impulse, again five waves will be found. In this smaller pattern, the same pattern repeats itself ad infinitum.

Example of an impulsive wave in an uptrend

Source: “Elliott Wave Theory”, Prognosis software development, p. 5

Studying the patterns is very important in order to apply the Elliott Wave Principle correctly. The pattern of the market action, if correctly determined, not only tells an investor to what price levels the market will rise or decline, but also in which way (or pattern) this will happen. When an investor is able to recognize the patterns, and apply these patterns correctly, he can trade the Elliott Wave Principle. However this is not easy to accomplish due to the fact that the theory itself is very complicated as it consists of many patterns, which incorporate Fibonacci ratios. That is also a reason why explaining it in detail cannot become a part of this essay.

In the 70s, the Wave Principle gained popularity through the work of Frost and Prechter. At present there can be found a lot of software on the market which uses different engines to perform wave count according to Elliott Wave Theory, or a neo/modern version of it.

Obviously the Elliott Wave Principle can get very complex – especially in corrective waves – since the person applying it will have to look for patterns, which contain patterns, which contain patterns etc. etc. The problem is that sometimes several alternative counts can be found pointing not in the same direction. That is why the key to forecasting markets with Elliott Wave Theory lies in determining the probabilities of alternative scenarios, assessing their probabilities by studying their compliance with the permitted internal wave structure, and supporting the analysis with other indicators.

4. Trading the Elliott Wave (example)
An investor willing to use Elliott Wave Theory should first of all determine which patterns and alternative wave counts give the best trading opportunities, such as when several alternatives all produce a price movement in the same direction. Afterwards we should determine objective entry points based on patterns (a point at which we are sure the pattern is valid) as well as objective exit points, also based on patterns. You should for example exit a trade when a price movement makes your preferred wave count invalid or when a price movement reaches its target.

Suppose the market has experienced a big sell off. From the low it starts to rise. Wave 1 (or A) and waves 2 (or B) have been completed and the market starts to rise again. The first picture shows two scenarios possible, either an impulse (1,2,3) or an A, B, C correction.

Forming of a pattern

Source: “Elliott Wave Theory”, Prognosis software development, p.39

The pattern can be an impulse only if the 4th wave does not overlap the first, a level indicated by the horizontal “stop” line. If it does we might be dealing with a correction. This correction will be confirmed when the price drops under the origin of wave C, which is the end of wave B. Provided it doesn’t drop under the “confirmation” line, it cannot be assumed that the market will go down.

Scenario number one Scenario number two

Source: “Elliott Wave Theory”, Prognosis software development, p.39

In the first scenario we might want the pattern to confirm itself therefore we might want to wait for the price to come near the stop line and enter the trade, which is quite hazardous, as it would require exiting it with a loss when it turns out that we are in a correction. We could also wait for the trend to turn. However, we then lose part of the move, which is part of the profit. The best way to deal with this problem is to combine the wave count with other indicators.

When analysing the second scenario it becomes obvious at a certain point in time that we are dealing with a downtrend. That situation would require from us to wait for the confirmation and during that time we lose part of the profit just as in the situation described above.

After entering the trade we will know the exit point (stop line) and the take profit point, meaning that we know how much we can lose (risk, amount of money lost by the time we can clearly state that we were on the wrong side of the market) and how much we can gain (return, amount of money that we receive when the prices hit the take-profit level). That makes exactly this type of analysis very useful in portfolio management, as we receive a tool that is able to objectively measure risk/return ratio on the basis of which we can evaluate our next move. After each trading day we can perform an update of our positions not only on a guess basis, but taking into account the before mentioned risk/return ratio and the changes in prices. What is more, advanced forms of Fibonacci ratios enable us to calculate time clusters, meaning that we can expect how long will it take for a pattern to form and when can we expect a given trend to come to an end. We should not, however, rely on risk that is small. It means in practice, that we might be easily wiped of the market in a short term opposite movement, as our stop will be close to the entry point. Also, a small number in the nominator would dilute the risk/reward ratio.

5. Indicators[2]
In general, an indicator is a result of mathematical calculation (formula), based on prices and/or volume. The received figures are important because they act as an alert to study price action a little more closely. Furthermore, they can be used to confirm other technical analysis tools and finally, indicators can be used to predict the direction of future prices. Unfortunately there are hundreds of indicators. Which should we choose then? If we have a closer look at the indicators, it could be said that they can be divided into two main categories; moving averages and oscillators. These two measurements can be used in several ways as they might be: presenting strength of a trend, support and resistance levels; divergences that occur between indicators and price, suggesting a possible future trend reversal; confirming trend reversals.

Moving averages are one of the oldest and most popular technical analysis tools. A moving average is the average price of a security at a given time. When calculating a moving average, you specify the time span to calculate the average price (e.g., 25 days). If the security's price is above its moving average, it means that investor's current expectations (i.e., the current price) are higher than their average expectations over the last 25 days, and that investors are becoming increasingly bullish on the security. Conversely, if today's price is below its moving average, it shows that current expectations are below average expectations over the last 25 days.

The classic interpretation of a moving average is to use it to observe changes in prices. Investors typically buy when a security's price rises above its moving average and sell when the price falls below its moving average. However the disadvantage is that you will always buy and sell late. If the trend doesn't last for a significant period of time, typically twice the length of the moving average, you'll lose money. That is why MACD gained more importance.

The MACD ("Moving Average Convergence/Divergence") is a trend following momentum indicator that shows the relationship between two moving averages of prices. The MACD is the difference between a 26-day and 12-day exponential moving average. A 9-day exponential moving average, called the "signal" (or "trigger") line, is plotted on top of the MACD to show buy/sell opportunities. The basic MACD trading rule is to sell when the MACD falls below its signal line. Similarly, a buy signal occurs when the MACD rises above its signal line. It is also popular to buy/sell when the MACD goes above/below zero. The MACD is also useful as an overbought/oversold indicator. When the shorter moving average pulls away dramatically from the longer moving average (i.e., the MACD rises), it is likely that the security price is overextending and will soon return to more realistic levels. On the other hand, however, when shorter moving averages reaches high levels we can be almost sure that the prices, after declining slightly, shall almost come back to their previous levels in order to establish a divergence. This is a strong indication that an end to the current trend may be near. A bearish divergence occurs when the MACD is making new lows while prices fail to reach new lows. A bullish divergence occurs when the MACD is making new highs while prices fail to reach new highs.

Another indicator that offers a wide range of trading signals is RSI, which is a price-following oscillator that ranges between 0 and 100. A popular method of analyzing the RSI is to look for a divergence in which the security is making a new high, but the RSI is failing to surpass its previous high. This divergence is an indication of an impending reversal. When the RSI then turns down and falls below its most recent trough, it is said to have completed a "failure swing." The failure swing is considered a confirmation of the impending reversal. Apart from that the RSI usually tops above 70 and bottoms below 30. It usually forms these tops and bottoms before the underlying price chart. It often forms chart patterns such as head and shoulders or triangles that may or may not be visible on the price chart. The same applies for support and resistance levels, Gann fans.

The Guru Index

In the portfolio management sense Gurus are people who write for newsletters and publications on matters of business and the economy. The Guru Index is a measure of their levels of optimism (expecting a bull run) or pessimism (expecting a bear run). This is then noted as a percentage of bullish / bearish sentiment.

Below a table details the ratio and frequencies of bearish sentiment in the market and the performance of the Dow Industrial Index 6 months later.

The data seems to confirm the logic of the Rule of Contrary Opinion, a belief that there are gains to go against popular opinion, as often people work each other into frenzy when there is nothing quantifiable to back up such enthusiasm. This is because the data shows that experts’ strong opinions tend to correlate inversely with stock market movements. For example, high bullish opinions of experts normally correlate with a decrease in the marketplace, and high bearish opinion correlates with a large increase in the marketplace.

The Rydex Ratios
Among the Rydex Mutual portfolio of funds there exists the Rydex Nova Fund and the Rydex Ursa Fund. The Nova Fund is leveraged to cover 150% of the S&P 500 market, i.e. earn larger or smaller losses than possible with simple investing. On the other hand, the Ursa Fund works in the opposite way, being an inverse to the markets movements.

The amount invested for each of these funds is then measured and turned into a ratio, with the bearish Ursa fund being divided in value by the bullish Nova funds value for a ratio.

The diagram below highlights a strong correlation, with similar movements in the data to the movements of the Ursa / Nova indexes.

Similarly, the theory of Contrary Opinion highlights how extremes in opinion, such as Ursa : Nova ratios being higher than 3 preceding an increase in the S & P, or a ratio below 0.3 signalling a decrease in the S & P 500. However. These funds are recent and as a result there has not been enough data to fully substantiate how useful an indicator the Rydex Ratio is.

Even if we are happy with the above mentioned indicators, or with any other taken from a long list of trading tools there is always a way to make it even better. All of this can be accomplished with neural networks. We can take a number of different length RSI oscillators, pass them to the neural network, and ask it to use those inputs to improve our original RSI oscillator. In that way we would receive trading signals at least 2-3 days earlier, which is a big advantage. What is more we can combine several indicators when performing the calculations, which can also give us interesting results in a form of an indicator that incorporates several others and performs in a completely new way.

6. Trading strategy

All in all technical analysis is a broad area of study, offering many trading methods. That is why some of them will always be contrary towards each other, giving opposite signals. Therefore each investor should establish his trading strategy. In order to stay on the right side of the market we should follow the Elliott Wave Theory, which may be supported by moving averages. That will enable us to “trade with the trend”, manage our portfolio most efficiently with risk/return ratio. However for timing the trade we should take into account other indicators, most preferably few of them, augmented by neural networks. They would be helpful in entering and exiting a trade in the most proper moment.

Conclusion

Technical analysis is the attempt to understand the seemingly random stock market and enable investors to make better informed decisions about how to speculate their money effectively. However, it has to be remembered that there will never be a golden rule to understanding the stock market. Tools such as the Elliot wave, although highly useful at forming a more quantifiable approach to investing have their limitations. Like all models, the Elliot wave is built upon certain inferences and assumptions. Sometimes models put too much or too little emphasis on particular information. Often tools become less useful over time, as the factors explaining the tool’s reliability become outdated and less important to business and the economy. Unfortunately, it (just as every other form of analysis) has its limitations, as the stock markets movements are too complex for one set of guidelines.

This does not mean that they should never be used but merely employed in moderation. The use of a carefully chosen group of technical tools to complement your knowledge is a sensible option. However, overburdening yourself with models, no matter what their potential use is can be dangerous and highly misleading. For example, just as somebody having a studios worth of musical equipment does not guarantee any musical chart success (even though it may help) an investor is not necessarily going to become wealthy by hoarding stock market models. Ultimately, technical tools are indispensable for an investor keen to anticipate the correct time to invest and the correct time to sell. It is just necessary to remember that a balance needs to be maintained between a collection of tools correctly tested and understood in terms of their benefits and limits of analysis and an investor’s gut feeling, which being formed from life experience is probably the most important tool an investor has.

Report written by Marisa Ahuja, Cristina Obando, Rafal Szymczak, Jonathan McHugh and Audrey Mailott in April 2006

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[1] “Elliott Wave Theory”, Prognosis software development, www.prognosis.nl

„Elliott Wave Theory”, Frost, Prechter

[2] “Technical Analysis from A to Z”, Achelis

„Technical Analysis Explained”, Pring

“Technical Analysis of the Financial Markets”, Murphy

Book Review of Cultures and Organizations: Software of the Mind.

Authors: Geert and Gert Jan Hofstede 2005 McGraw Hill

Geert and Gert Hofstede’s revised book, Cultures and Organizations: Software of the Mind contains three different approaches to understanding cultures and management throughout the world and thus need to be examined separately. The first reintroduces and builds upon Geert’s work in the 1970s on cross cultural differences among IBM’s global network of employees using his five dimensions of High vs Low Power Distance, Individualism vs Collectivism, Masculinity vs Feminism, High vs Low Uncertainty and Long vs Short Term orientation in order to help differentiate national characteristics. Part Two is an attempt to create a similar language for different business cultures in organizations. This is done through documenting similar methods to Geert’s IBM research, measuring the differences between employees within an organization, differing company goals and attempting to show how nationality can influence the value held. Part Three is intended to be a practical guide for recognizing and dealing with cultural differences and shocks and advice for differing groups to use, such as multinationals, politicians, media groups and parents. Its methodology, particularly in the first half of the book is to start from a statistical framework for highlighting differences and then justifying it with real world experience and academic research. This is where its success lies. However, as the book develops it becomes too general and as a consequence holds less authority, as it becomes less scientific, too broad and more effectively covered by other textbooks.

Introductionary Section

The backbone of Hofstedes’ book is that culture mentally programs everybody, both consciously and unconsciously, with society forming peoples values as a result of symbols (words, gestures, pictures, or objects), heroes (people living or not highly prized in a culture) and rituals (unnecessary collective activities carried out for their own sake. Presented in the form of an “Onion” (below), which shows the interrelationship and the steps that form values and how each group is visible (the furthest away from the centre).

Geert’s work considers this to be self replicating, with one generation passing down its fundamental beliefs, which although slightly changing as a result of individual personality and contemporary developments in the world will still continue.

This notion is even stretched into the context of social Darwinism, with a belief that differing cultural patterns exists for different groups of apes and chimpanzees. The differing forces put on man, it is explained forced man to live with differing values to others, as climate and differing challenges forced communities across the world to employ different priorities in order to be more successful. Gradually developing throughout the periods of man, Darwinism sits comfortably with Hoftedes’ cultural reasons as to why some people took on certain characteristics, even explaining why some races disappeared, declined in influence and why there were some major events in history, such as the reformation. This is obviously creates a form of analytical bias, which forms a more of an social evolutionary framework than political, economic or even religious (often too heavily criticized, possibly from a scientific bias) analysis of world events and development.

The attempts to highlight the methods of research draw an interesting insight into the process of analysis. The procedure of validating, i.e. drawing assumptions from the real world in order to justify statistics can be dangerous, as it can result in people seeing validation everywhere, despite having misleading information. However, the text is well research is well balanced, with views from Europe (particularly French), S.E Asia (particularly China) and America clearly represented and balanced satisfactorily.

Part One: Dimensions of National Cultures

Geert Hofstead’s research into IBM employees from around the world was an attempt to understand the differing values that people hold and to create some language or tools for understanding why this exists and how this can effect future actions. The aforementioned dimensions of High vs Low Power Distance, Individualism vs Collectivism, Masculinity vs Feminism, High vs Low Uncertainty and Long vs Short Term provide highly interesting conclusions to different thinking patterns.

The dimension of High vs Low Power Distance has been able to differentiate between countries desire for either highly regarded figures, whether private, public or communal or the ability to question authority and expect more from them. This method was able to differentiate between groups of countries, such as the Scandinavian block, which favored a more democratic process and more authoritarian countries such as China, which preferred leaders to exercise more authority

Individualism vs Collectivism highlights how people and groupings prioritize themselves, with individualist countries favoring personal ambition, whereas collectivists put a greater emphasis on group priority. This enables analysis as to why America is more individualist compared to Japan and offer ways to deal with this.

Masculinity is described as a method of achieving results no matter what the costs, whereas Femininity is the belief in allowing other things to be prioritized in society than material gain. With this tool the book was able to detail why masculine countries such as the USA had such an aggressive form of capitalism and countries such as Sweden prefer a more caring welfare state.

High verses Low uncertainty countries responses to events and groups of people were considered to be highly different as a result of differing needs for stability and fear of unknown groups or events. The data collection was used to justify why it may have been possible for racism in Germany in the 1930s and a low amount of laws in relaxed countries such as Australia.

The fifth dimension, Short vs Long Term Orientation describes how and why some cultures have their eye on the future, such as China, whereas countries such as the United States are very much focused on the now. This assumption is used to justify policies ranging from why Americans do not save enough to factors underlining what people desire from relationships.

The success of this strain of analysis is to highlight not only differences more obvious between continental cultures but also subsets, highlighting differences between (for example) North European and Southern European as a result of different climates, resources, history forming habits. As a result conclusions as to the similarities between Austria and Germany and Spain and Portugal both using statistics of IBMs employees and analysis appears highly insightful.

The method of analysis using validation from an evolutionary perspective has been very well used. However, many assumptions, although appearing correct become misleading after detailed analysis. For example, bracketing the growth of Protestantism in England and Germany together as a cultural movement is misleading, as it was politically top down (ie Henry VIII) in England and bottom up (as a result of the Gettysburg Press). So much emphasis is put on culture by the authors that it forgets that there are moments in history where cultures are formed as a result of institutions (such as the growth of English Protestantism) or from major events that cause shifts in cultures (although briefly mentioned more could have been made on the potential effects of the September 11^th attacks on America’s uncertainty avoidance for example.

Part Two: Cultures in Organizations

Satisfied by the analysis of why different cultures have alternative beliefs and habits, Part Two attempts to do the same in terms of work culture and management. However, its emphasis on summarizing other works and integrating them into the authors’ own viewpoint shows a lack of confidence and less of a coherent method of cutting across the thinking and processes of individual companies than in Part One.

Highlighting works such as Mintzberg’s Cultural and Organizational Structure help to understand organizations, such as the five configurations (The Simple Structure, The Machine Bureaucracy, The Professional Bureaucracy, The Divisionalized Form and the Adhocracy). This can help highlight how an organization coordinates, standardizes and monitors processes. Again, there is felt to be some sort of correlation between his conclusions and that of the IBM inter country research, with the idea that certain countries would hold preferences for certain structures, such as the United States preferring the Divisionized form and France the Bureaucracy as a result of certain cultural preferences.

Similarly, the summary of the different Corporate Goals of national companies similarly offers an interesting look as to how companies govern themselves. The rankings of the six greatest priorities of businessmen also seem to correlate well with Geert Hofstede’s Five Dimensions Theory.

Hofstedes’ conclusions over risk and accountancy practices seem to fit rather well, with differences in Power Distances and Uncertainty enabling for a suitable point of discussion for differing accounting practices. The notion of symbols is also used well as a tool to differentiate the differences in the value of money and the conventions held between bankers and accountants.

In their analysis, Geert and Gert Jan reference American management theories very rarely. Whilst discussing leadership and motivation they feel the need to mention it but as European academics are keen to distance themselves, with only one American quotation in the whole text. Their cynicism is seen when highlighting the situations which enable American models to be successful but also showing how the differences that exist between countries (as shown in the 5 dimensions) highlight a poor fit of cultural styles. Later they back this up, citing the failure of organizational culture theories when adapted to France. This is well reasoned, with their philosophy of cultural inclusiveness giving clues but beneficially offering no concrete answers, in order to foster personal customization, suggesting that there is no single formula for developing successful managers that can be used in all cultures.

The more original research into organizational cultures find six dimensions, namely Handling People vs Handling Things (comparing the roles or nurses and engineers in who or what they deal with); Specialist vs Generalist (a psychologist would be more specialist than a politician, say); Disciplined vs Independent (a police officer would have less discretion than a shopkeeper); Structured vs Unstructured (a systems analyst would have more of a defined role than a fashion designer); Theoretical vs Practical (a professor would be more academic than a salesman) and Formative vs Pragmatic (where procedures were more important than results, such as in the public sector).

This is built upon when these results were used to distinguish between Elephants, slow bulky but self confident companies and Storks, reliable, caring and transporting companies. Subcultures are more easily understood when tied in with further theories on Alienation, Commitment to work, a personal need for achievement, personal masculinity, orderliness and authoritarianism.

Similar to Geert Hofstead’s 5 dimensions of national cultures the 6 dimensions of organizations are non discriminatory, merely being tools to analyze the differences between companies and possibly help judge the possible suitability. Although useful as a result of not focusing entirely on cultural issues the topic feels like a shoe-in of new management theories into Geert Hofstede’s cultural dynamics philosophy covered in Part One. As a result the theory is useful, although not revolutionary.

Part Three: Implications

The third part offers a range of situations, such as diplomacy or in business, which helps to highlight flaws in cross cultural misunderstanding. For example, dangers to international mergers and acquisitions have been highlighted in situations such recognizing both areas for at least an interim period and the necessity of charasmatic leadership

Problems of culture shock are summarized well in the Acculturation Curve (below), which summarize a tourist or expatriate worker over time. This is divided into Euphoria (A), the positive experience of finding something new, Culture Shock (B) the readjusting to new norms, Acculturation (C), the coming to terms with a new environment and A Stable Set (D), where the experience settles and is either positive, neutral or negative.

Time

The book suggests that failures from cultural shocks are overestimated, with statistics quoted usually being echoed from unreliable sources. It also appears correct in addressing that problems that do occur and suggests useful methods to limit this. In the case of businesses the advice of forcing expats to integrate more and give them adequate cultural teaching (if language training is too difficult given the time) is helpful but not too illuminating.

Conclusion

This book is an interesting and broad introduction to the challenges of organization and individuals dealing with other beliefs and processes. The development of cross cultural understanding using the language of Hofstede’s five dimensions mentioned in Part One can be a highly powerful tool for analysis. The management advice in Part Two for looking at organizations and comparing is useful, although not revolutionary. Similarly, the Third Part creates a useful insight into the challenges created from dealing with other cultures, although it is not as distinct as the advice offered in other texts. Ultimately the three part approach to cross culture is interesting but flawed. The quality of writing at the beginning was so much more thought out than the final two parts that the authors would have benefited from more of an integration of ideas or treated as three separate topics in different books.

This review was written by Jonathan McHugh in April 2006

Protectionism In Europe: The Effects Of Economic Integration On Domestic and International Barriers To Trade

The threat of continuous war coupled with the economic poverty of post war Europe forced European state leaders to look at newer methods of increasing wealth and guaranteeing political stability over the continent. The result was the European Union, an economic block without barriers to trade and capital, dispelling the ethnocentricity of the past and replacing it with cooperation. However, the removal of protectionism within Europe was not smooth, with states having to dramatically alter their economic and political processes in order to benefit from the reforms and save their industries from the tidal wave of free trade. However, protectionism does still exist, albeit with other trading blocks. National preferences also exist, and affect how Europe negotiates trade agreements with other nations.

Protectionism grew as a result of centralised governmental authority eroding the freedom and profitability of international traders. This peak of governments’ cross border dominance was the sixteenth century use of mercantilism, the belief that a country’s wealth increases through acquiring as much gold as possible through high import tariffs and export subsidies. This helped to protect domestic trade from a mercantilist neighbouring country, although this would be reciprocated by other government’s retaliating through raising their import tariffs and subsidising their exporters so that their country could improve its level of trade. Although mercantilist practices have declined over the following centuries as a result of academic criticism and political events its ideas still lived on, with European states having a history of preferring to open up new markets across the world using military means to establish colonies, rather than trade with each other.

The most significant catalyst for the weakening of this protectionist attitude emerged from the First and Second World Wars. The years of devastation and bloodshed forced world leaders to re-examine their visions of how it was possible to increase economic wealth and guarantee economic stability. As a result politicians opened their doors to business and academics creating new, unprecedented economic, political and social models.

One of the most significant and obvious examples of this is the European Union. The Economic Coal and Steal Community in 1951, whereby France and Germany sharing their coal and steel resources in order to guarantee political and economic interdependence became a blueprint for future political and economic cooperation. This culminated in the Maastricht Treaty of 1993, creating the European Union, which removed all internal barriers to trade and free movement of capital. Europe has now become the greatest experiment into the possibilities of economic cooperation through its open markets and a model for other continents such as the Pacific region, which is making tentative steps to examine the possibilities of economic integration as a result of the evident benefits of increasing international business through one larger trade block.

However, this has not been without costs. Protectionism is one of the most valuable tools that a government can potentially employ. The removal of these economic aids revealed gaps in European members’ economic policies. For example, France had experienced successful post war growth as a result of its dirigiste economic model of planned investment in heavy industry in order to create ‘national champions’ that could carry “the banner of France into world markets,”[1].

However, following the gradual reduction of trade barriers after the Treaty of Rome in 1957 France was left “saddled with huge coal, steel, shipbuilding and automobile companies that were absorbing public funds but which had substantial overcapacity and could not produce as cheaply overseas.”[2] A hangover of misallocation resulted in France not having enough medium sized and small companies to compete effectively enough with more dynamic European traders. The French model, which had been the guardian of traditional industry and the backbone of French social security was abandoned in 1983 by the Socialist Mitterrand Government, as “their policy was unsustainable economically”[3] The political instabilities created as a result in economic shifts from removing protection may also help explain France’s reluctance to allow for the EU’s tariffs on agricultural goods to be reduced, as France considers its agriculture to be the rock of French culture.

The Member States of the EU share a common tariff to external countries. Although limiting autonomy of individual countries, such as the UK in its attempts to retain stronger trade links with its former colonies there are obvious benefits to a unified policy. The combined economic size of $12,918,581m[4] makes it more effective at negotiating with foreign countries and achieving more acceptable conditions, albeit possibly at the expense of other nations.

As a trading block the EU is keen to maximise its interests. Although seeing the principle of free trade as important and worth promoting measures are in place with specific barriers to encourage FDI within the EU. For example, the import tariff for automobiles is sufficiently high to force American and Japanese car manufacturers, who would otherwise have a cost advantage to relocate many of their production facilities within the EU. This is because policy leaders consider that the benefits of maintaining a car manufacturing presence in Europe whether foreign or European owned outweigh the economic effects of higher costs and reduced supply for European consumers.

The problem for EU policymakers is how to work out when they should and when they shouldn’t use protective measures to save European industry. A contemporary problem is whether or not the EU should erect barriers to protect the European shoe making industry. European shoe manufacturers have had their profits eroded as a result of cheaper imports coming from Asia making it difficult to trade, with some companies struggling to break even. Some manufacturers have accused countries such as China of ‘dumping’ their goods on European markets through selling their goods below manufacturing costs in order to wipe out competition in the long run. This particularly affects the Southern European countries, where most of the factories are located.

However, as many have pointed out textiles are not a priority of China and it is highly unlikely that they would bother coordinating a strategy for such a mature market. The Danish Minister for Economic and Business Affairs highlighted the lack of real proof and highlighted how the domestic market was attempting to ‘capture’ EU regulators. He cited that with a 40% tariff on shoes the average cost of shoes would rise from €67 to €87, a 25% increase. He also felt that the fact that the European traders would gain €100m a year whereas European consumers would lose around €975m, a year as a result of higher shoe costs and consequentially it was not in Europe’s interests for there to be a tariff, despite the fact that this could result in a decline of shoemaking in the EU.[5]

Even though Europe does not have trade barriers to encourage free trade and movement in capital it would be churlish to assume that protectionism is dead in Europe. Protection and national interests still exist but the scope has become narrower for policymakers. Government leaders can not influence their own protection barriers but countries such as France will still endeavour to put agriculture first and Southern European countries will still lobby for tariffs on shoes, despite knowing that it will be to the detriment of most Europeans. However, the absence of trade barriers has created an unprecedented period of peace in Europe, as countries are given more incentives to cooperate rather than compete with each other.

This report was written by Jonathan McHugh in April 2006

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[1] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p171

[2] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p175

[3] Schmidt VA The Politics of Economic Adjustment In France and Britain: When Does Discourse Matter? (Journal of European Public Policy) 2001. p253

[4] http://en.wikipedia.org/wiki/European_Union (apologies for use of currency)

[5] Financial Times, February 20, 2006