is market random?

is market random

  • yes

    Votes: 9 16.1%

  • no

    Votes: 17 30.4%

  • not all the time

    Votes: 19 33.9%

  • does not matter

    Votes: 11 19.6%
  • Total voters
    56
Agree mostly, caveat though that some pricing models indeed are better than others at capturing the true distributional properties. The French quant derivatives guilt has carved itself out a nice edge by running their own customized pricing models that I firmly believe capture risk (the first derivatives and higher order ones) better than classic pricing models. I have seen it way too much over the many years to resort the out performance to mere chance.

panzerman said:
Financial markets can be modeled under any number random variable models and their assumed distributions (ie normal, lognormal, pareto etc.) The problem is that none of these models explains reality significantly better than any of the others. The reason is that the underlying processes are more complex than the statistical models can capture. Gee, there's a revelation, human behavior is complex and highly unpredictable.

So the real answer is yes and no. The task is to discern when it is and when it isn't, and have the proper trading plan in place to deal with regime change from random to non-random.
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GRULSTMRNN said:
Absolutely not. Financial non interest rate asset time series are not stationary, they do not imply reversion to the mean in extreme moves. Through differencing though, for example, you can transform a random/stochastic process into a stationary process. Indexes never revert back to any mean because of any log return properties or for any other mathematical reason. No random process found in non-interest rate financial time series or distributions that define financial time series well have mean reverting properties that are dictated by mathematical principles. Interest rates do. Not others.
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My issue with the differencing method is that anytime you take a difference, you add 6dB of noise at the Nyquist frequency. You can see this in the differenced data versus the original data. The differenced data may be stationary, but is also much noisier.
 
I find close to zero value in differencing financial time series. Just mentioned it as it is one way to get to a stationary series, which financial asset price series are not.

panzerman said:
My issue with the differencing method is that anytime you take a difference, you add 6dB of noise at the Nyquist frequency. You can see this in the differenced data versus the original data. The differenced data may be stationary, but is also much noisier.
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gaussian said:
If I throw a ball 10 times into a basket does that mean on the 11th time it will make it in - or is it some function of probability - the environment (market noise), my mentality (strategy), and my team (market sentiment)?

It's foolish to say what you are saying. Why is it foolish? Apophenia is the term. Humans are fundamentally incapable of determining real patterns from an imagined ones in any general case. How do you think you get people who believe the moon has some effect on the market! The gamblers fallacy is a popular explanation for people "being sure something will happen" after some event in the past. Indeterminable odds are not 1:1. Indeterminable odds are indeterminable.

Enlightenment is realizing you are gambling and playing a game of probabilities - foolishness lies in pretending any pattern has any fundamental absolute meaning. There is significant difference in saying "when X, there is a 45% chance of event Y happens" and "because I saw a bearish engulfing pattern Y will happen".
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all this does not matter
can you make money or not?
are you making money or not?
if you cannot find something else.
saying i am making money because of luck or gambling is foolish
 
Peter8519 said:
Does this look random ?
chart.ashx
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finally some one has done it.....posted a chart.
 
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