Paul Rabbitt: The Statistical Scholar Of OpCo by Thom Hartle
Oppenheimer & Co. senior vice president and chief quantitative portfolio strategist Paul Rabbitt has a
number of credits after his name, among which are contributing forecaster for Standard & Poor's
Consensus Forecasts and regular contributing analyst for CNBC. But Rabbitt is unusual in that he chose
to put a successful and profitable career on hold to return to graduate school, writing his thesis on
technical analysis and doing along the way detailed statistical research on more than a hundred
indicators. STOCKS & COMMODITIES Editor Thom Hartle spoke with Rabbitt via telephone on February 24,
1993, covering topics ranging from his thesis to his thoughts on the perfect system to the quantitative
stock ranking system.
Let's start with some background, Paul.
Well, I've been in the brokerage industry since 1976 and moved to Oppenheimer in 1978 as a retail
stockbroker. I focused on fee-based money management and soon discovered I needed to develop my
own discipline to augment the research I was reading. What I was attempting to compensate for
intuitively has since been proved in a survey by David Dreeman at Dreeman Value Management. In his
1991 study, Dreeman found that the accuracy of analyst earnings estimates has markedly deteriorated in
the past two decades due to the additional servicing and corporate finance demands on their time. So, in
the mid-1980s, while I was working full-time at Oppenheimer as a stockbroker and money manager, I
went back to school for my master's degree. I went to a school with a heavy emphasis on producing a
thesis as part of your overall degree.
Your thesis was about technical analysis?
It was about monetary, contrarian psychology and technical analysis. In my studies, I had been pulled in
many directions by proponents and opponents of technical analysis, some of whom argued that technical
analysis was the only way to go and others who argued no, you need to view the economy, the monetary
situation and what the Federal Reserve bank is doing, use monetary and economic analysis instead. Then
there were others who told me to be a contrarian; do what everyone else is not doing and you'll make