We are really not seeing eye to eye with this. I apologize for causing any confusion. Yes, obviously the adaptive market hypothesis sets out to disprove random walk--- im not sure how i said otherwise. One example, buffett, is purely an outlier. You cant use an outlier to prove or disprove anything. I maintain that in the absence of information markets appear random. surf
MS, i ask on what mathematical authority you deem evey capital market random and therefore incapable of producing profit for many participant??
My you do have a talent for wriggling. When the random walk hypothesis is challenged you offer the adaptive market hypothesis as an alternative and in the same breath say you don't find it practical. So the markets are random which is why TA does not work but they are otherwise not random. Why don't you clearly and succinctly state what you actually believe? I did not offer Buffett as proof of anything. Please read my post again. He challenged the random walk hypothesis and offered his performance as support for his position. I find it interesting that neither Malkiel nor any scholar saw fit to disprove his contention that as an outlier his performance meant nothing. I suspect that unlike you, they were able to recognise that it only takes one hole for a roof to leak. Again, not an example but a challenge that has gone unanswered.
Randomness does not mean incapable of producing profits. My belief is, this is good because it allows me to articulate this, is that from the perspective of a price action TA trader markets are random despite the individuals being fooled by randomness and thinking not. This can be proven by random number ( within market parameter) charts--- which look just like stock charts. Can price action TA traders make money? Sure! But its due to prudent money management---
economics professor at Princeton University and writer of A Random Walk Down Wall Street, performed a test where his students were given a hypothetical stock that was initially worth fifty dollars. The closing stock price for each day was determined by a coin flip. If the result was heads, the price would close a half point higher, but if the result was tails, it would close a half point lower. Thus, each time, the price had a fifty-fifty chance of closing higher or lower than the previous day. Cycles or trends were determined from the tests. Malkiel then took the results in a chart and graph form to a chartist, a person who “seeks to predict future movements by seeking to interpret past patterns on the assumption that ‘history tends to repeat itself’”.[5] The chartist told Malkiel that they needed to immediately buy the stock. Since the coin flips were random, the fictitious stock had no overall trend. Malkiel argued that this indicates that the market and stocks could be just as random as flipping a coin. From wikipedia
From my mentor, a fund manager and stats PhD 'Any trend that exists can be quantified and its departure from randomness can be measured with the usual statistical procedures, such as confidence intervals and likelihoods. Serial correlation coefficients, regression coefficients of current changes versus past changes, and magnitudes of the impact of past moving averages on the future, distributions of the length of runs, the correllelogram, the expected waiting times between peaks and valleys, survival statistics. All these techniques are very good at discovering any non-random elements. To join a proper debate, such measures must be quantified for various markets and various times, and the degree of uncertainty and departure from randomness must be ascertained. I have never found a movement in prices that anyone could make money with by a trend following method that didn’t also show a major departure from randomness revealed by the standard statistical measures I mentioned. The tragedy is the mysticism and blind acceptance of trendism, that trend following exponents proclaim, without any evidence as to magnitude and uncertainty. No self-reported results that selected individuals or leaders might have made in the past shed light on the debate.