Kudos to MMs
- Thread starter nitro
- Start date
"SUCCESS is counted sweetest
By those who ne'er succeed.
To comprehend a nectar
Requires sorest need.
Not one of all the purple host
Who took the flag to-day
Can tell the definition,
So clear, of victory,
As he, defeated, dying,
On whose forbidden ear
The distant strains of triumph
Break, agonized and clear." - Emily Dickinson
By those who ne'er succeed.
To comprehend a nectar
Requires sorest need.
Not one of all the purple host
Who took the flag to-day
Can tell the definition,
So clear, of victory,
As he, defeated, dying,
On whose forbidden ear
The distant strains of triumph
Break, agonized and clear." - Emily Dickinson
I now have a very rough form of the GDP weighted FV model. The results surprised me a bit. What I have found is that the value of FV becomes sensitive to the initial condition that we input as GDP. For example, I get a continuum of FV from ~1189 to about ~1260, depending on the odds of a recession and therefore GDP estimates. Raw is 1337.38. If I enter lower GDP numbers, FV drops even more dramatically, around 1050.
This range is too big for the time frame that I am hoping to use FV model for, but it may be ok for longer than one year investment horizons. On the other hand, I could continuously estimate the odds of recession on each indicator announcement, but that seems curve fitting. It is probably what the market itself does though! Remember, I am hoping to lead the market, not follow it.
I may start giving three FVs, the lower range, the higher range, and raw, but even I am beginning to doubt myself in this endeavor. In the absence of recession doubts, those three numbers should converge. Now I clearly understand why markets swing wildly on uncertainty - the mathematics gives you a range you can drive a truck through and you are just guessing. Therefore, VIX at 30 ish is probably FV.
This range is too big for the time frame that I am hoping to use FV model for, but it may be ok for longer than one year investment horizons. On the other hand, I could continuously estimate the odds of recession on each indicator announcement, but that seems curve fitting. It is probably what the market itself does though! Remember, I am hoping to lead the market, not follow it.
I may start giving three FVs, the lower range, the higher range, and raw, but even I am beginning to doubt myself in this endeavor. In the absence of recession doubts, those three numbers should converge. Now I clearly understand why markets swing wildly on uncertainty - the mathematics gives you a range you can drive a truck through and you are just guessing. Therefore, VIX at 30 ish is probably FV.