My points were 1. Securities actually behave very much like coins most of the time. Test it and see for yourself. The fact that millions of heterogenous groups play the same game (and the structure of the feedback loops) precisely make the market behave like that. 2. Even though coin throws are independent they still have a theoretical value around which they flucutate. It allows you to design positive expectancy strategies that can also be implemented in the market due to my point at 1. Ninna Ps I'm not familiar with the american education system, but I'm interested nevetheless. How does a major in math. relate to the bachelor-master-phd system?
How do you know? Did you test it? I did and I disagree with your statement. How can you justify noise on some timeframes but not on longer ones? What about the fractal symetry? Ninna
I have a test for you. Please explain the movement of stock BVF on the NYSE over the last three months making careful reference to your coin flipping theory. Then outline for me what trading strategy you have devised as a result for this stock. ps It went from $13 to $24 a share pretty much on a 45 degree angle throughout the time period.
We have some similar thinking. I have not looked at RW, but for a normal distribution, I have worked with 0.7979 unit of the standard deviation (which is mean absolute deviation). Do I get you right that you decide on a reference in order not to be fooled by RW?
Why would I limit myself in that way ? In 2010, the indexes have been flat and hardly worth investing in. Why would you not be more interested in a stock that has made a nice bullish run for three months after reporting decent news.
I have a suggestion for you. Prior to making any more mis-informed comments, you ought to realize what a context for discussion is. You are out of context, and unfortunately, beyond a required knowledge level. Using a "careful reference" from a selected price move is a stupid example. No one here is arguing the fact that markets make very abnormal moves fairly often. I think most would agree that few things about price movement are "normal" or strictly follow the distribution of an N coin toss. The point is that you ought to understand the nuance of coin tossing if you wish to understand the nuances of trading. It is a simple point and quite a few very succesful people will attest. Maybe this thread will be more informative: http://www.elitetrader.com/vb/showthread.php?s=&threadid=202782
There is nothing misinformed about my comments; if someone wishes to present a theory on here they better be able to explain it in reference to an example. This is the essence of science versus religon or superstition. BVF is actually quite a normal move for a stock where expected value has been upgraded for a fundamental reason. This is my point that differentiates markets from coin flipping. I've noticed this on many threads on ET lately, people are forgetting what stocks really are ( ownership in the underlying company ), getting lost in technical theories and not seeing the bigger picture.
This response is indicative of your inherent bias in the way you view markets, trading, investing etc. The theory presented here is very sound. If you had read the reference materials/threads, you'd be rethinking your own assumptions. We are not talking about personal biases here nor are we talking about some fundamental reason for price movements. We are talking about random behavior. The context of this thread is the mathemetical representation of a random stochiastic process, and, it's potential insights in the realm of trading. This is not some grand unified theory of what "stocks really are", it is a glimpse into what statistics can offer. In fact, you've missed the point so badly that perhaps you're not alone, so I'll make it very clear; when you don't understand randomness, you will never understand what is not random. It is the correlation versus causation fallacy in a nutshell. Case in point, how do you know the fundamental driver in the BVF example is statistically significant? Which elements of that price move repeat and what are the causes? How do you segregate potential causes into random versus non-random? Again, claiming "just look at the chart" is not evidence that you're looking at a non-random process (although in BVF's case this might be true). I can easily run a random time series process a few million times and from that set of runs you will see a couple of trends (i.e. random artificial price movements) that look just like BVF's "run"....