Stocks are random variables

as to the 4 handles comment

nobody is arguing that the market is not VERY efficient

that's not the point

if there is SOME inefficiency, then there is opportunity for EDGE

the market is not PERFECTLY efficient

i trade FOMC all the time in index futures. it is very profitable. the market does not INSTANTLY change from dow 12XXX to 12XXX+20. it moves back and forth as traders jockey for position, stops are hit, people jump on board, etc.

order flow.

because these are PEOPLE

it IS true that - in the long run - equities tend to be relatively efficiently priced. if you took the VWAP of a 30 yr period of a stock you would see that mean regression works and eventually most stocks average around their "fair value" (although fair value is arguable. technology changes, etc.".

but in the short run (remember, we are traders), they are often VERY inefficient.

the market goes about price discovery, and SEARCHES for value/efficiency. but it is not an instantaneous machine that instantly establishes the perfectly efficient price.
 
whitster,

From the comments you're posting, it really doesn't seem you fully understand the theory.

By the way, I was referring to peer-reviewed journals earlier, not books.

And I don't care if n>1,000,000,000. You're single instance is far from proof, ha. I'm also doubting your statistics background if you are using 1 known observation to disregard a time tested well respected theory.
 
i am well aware of the peer reviewed studies

the peers are ALL academics who don't know anything about TRADING

peer review does not mean you are correct. it means important people in your field of ACADEMICS agree with you. the history of science (and calling economics a science is a stretch btw) is FULL of examples where peer review was just an example of scientists reinforcing their bias.

heck, galileo was PEER REVIEWED and they found him lacking to put it mildly.

i don't care what an academic says about the market.

show me a trader who consistently can make money, and i listen to him

that's how i became successful. i learned what works, and did that stuff over and over, learned what didn't work, and stopped doing it

and this is not ONE instance. i was mentored by a very successful trader, i know several very successful trader, and again

this is statistics

given my THOUSANDS of trades, there is no statistically significant possibility that i am consistently making money because of randomness
 
Everyone can just be quiet and the moderator should have this thread close.


I had heard and read about this topic over and over again everywhere.
It's so pointless. Why? Because for the traders out there who are making
money, why need to prove to or argue with the market efficiency believers
that market is not efficient. You, the trader, did your homework, your
research, traded and the results pays off handsomely. You fought to get
where you are. Let the market efficient believers just believe what they
want and let them stay on the sidelines as they watch the traders gain
more and more money.

The market efficient believers can only get more jealous and the only way
for those market efficient believers to feel good about themselves is to
win the 'academic' and verbal debate by trying to proof on paper how the
market is efficient when the traders are proofing otherwise with the real
important evidence - gaining money consistently! Now Which is more valuable
to you - winning more money or winning an academic/verbal debate?!

And if you, the trader do ended up losing some money or still get no where
with the results, let them laugh. Who cares.. at least you, the trader can
be proud that you took the risk and time to achieve your passion and greatness
as oppose to some schmuck who sits on the sideline and say some market sh-t.

Just remember one of the top three most requested quotes that's about the
"man in the arena" or "not the critic" by Theodore Roosevelt. He stated:

"It is NOT THE CRITIC who counts: not the man who points out how the strong
man stumbles or where the doer of deeds could have done better. The CREDIT
belongs to the man who is actually in the arena, whose face is marred by dust
and sweat and blood, who strives valiantly, who errs and comes up short again
and again, because there is no effort without error or shortcoming, but who
knows the great enthusiasms, the great devotions, who spends himself for a
worthy cause; who, at the best, knows, in the end, the triumph of high
achievement, and who, at the worst, if he fails, at least he fails while
daring greatly, so that his place shall never be with those cold and timid
souls who knew neither victory nor defeat."

The readers should know who's the critic and who's the doer..

-B.W.C
 
Quote from whitster:


.....this is statistics

given my THOUSANDS of trades, there is no statistically significant possibility that i am consistently making money because of randomness
More...


You keep telling me about these statistics but all you keep quoting is individual case studies?

You're using individual case studies to define a broad spectrum of situations, people, and markets? Sounds more like sociology than statistics. And you're making fun of economics ? lol


Again, please refer to the journals, because, you see, they actually have statistics, not just individual case studies.......
 
Quote from bwc:

Everyone can just be quiet and the moderator should have this thread close.


I had heard and read about this topic over and over again everywhere.
It's so pointless. Why? Because for the traders out there who are making
money, why need to prove to or argue with the market efficiency believers
that market is not efficient. You, the trader, did your homework, your
research, traded and the results pays off handsomely. You fought to get
where you are. Let the market efficient believers just believe what they
want and let them stay on the sidelines as they watch the traders gain
more and more money.

The market efficient believers can only get more jealous and the only way
for those market efficient believers to feel good about themselves is to
win the 'academic' and verbal debate by trying to proof on paper how the
market is efficient when the traders are proofing otherwise with the real
important evidence - gaining money consistently! Now Which is more valuable
to you - winning more money or winning an academic/verbal debate?!

And if you, the trader do ended up losing some money or still get no where
with the results, let them laugh. Who cares.. at least you, the trader can
be proud that you took the risk and time to achieve your passion and greatness
as oppose to some schmuck who sits on the sideline and say some market sh-t.
More...



LOL sit on the sidelines? Again, here's someone else who doesn't understand the theory, but yet wants to debunk it. If you change a few words, this would make a great football coach rally, otherwise, it really doesn't make alot of sense in this thread.


DE Shaw is the most profitable investment bank in the world, yet they are also the biggest employer of PhD's in the private financial sector. Many of them are former professors. Must I go on?
 
Quote from WallStGolfer31:

LOL sit on the sidelines? Again, here's someone else who doesn't understand the theory, but yet wants to debunk it. If you change a few words, this would make a great football coach rally, otherwise, it really doesn't make alot of sense in this thread.


DE Shaw is the most profitable investment bank in the world, yet they are also the biggest employer of PhD's in the private financial sector. Many of them are former professors. Must I go on?
More...

You're invoking D.E. Shaw to support th e idea that markets are random? You are confused, sir.

forbes.com:

"Son of efficient-markets theorist made fortune exploiting market inefficiencies with sophisticated computer models. "

http://www.forbes.com/lists/2006/54/biz_06rich400_David-E-Shaw_201Q.html

Fletch
 
Quote from WallStGolfer31:

The key word there is MADE, not MAKES. Made refers to the past.
More...

D.E. Shaw's funds still make money and they still do quantitative modeling.

So does Renaissance Technologies, who also employs an army of quantitative scientists:

http://en.wikipedia.org/wiki/Renaissance_Technologies

"Renaissance uses computer-based models to predict price changes in easily-traded financial instruments. These models are based on analyzing as much data as can be gathered, then looking for non-random movements to make predictions."

"considered in the industry to be the most consistently successful hedge fund"

"Its $5 billion Medallion Fund has averaged 35% annual returns, after fees, since 1989"

Dr. Simons himself says that there are predictive movements in the markets.

But I guess we should all believe you over him, huh? After all, he is only the most successful hedge fund manager of all time, on top of being a world renowned mathematical scientist.

Fletch
 
Quote from fletch2:

D.E. Shaw's funds still make money and they still do quantitative modeling.

So does Renaissance Technologies, who also employs an army of quantitative scientists:

http://en.wikipedia.org/wiki/Renaissance_Technologies

"Renaissance uses computer-based models to predict price changes in easily-traded financial instruments. These models are based on analyzing as much data as can be gathered, then looking for non-random movements to make predictions."

"considered in the industry to be the most consistently successful hedge fund"

"Its $5 billion Medallion Fund has averaged 35% annual returns, after fees, since 1989"

Dr. Simons himself says that there are predictive movements in the markets.

But I guess we should all believe you over him, huh? After all, he is only the most successful hedge fund manager of all time, on top of being a world renowned mathematical scientist.

Fletch
More...



Don't ever send me or anyone else a wikipedia link and quote from it if you want anyone to even think of respecting you.

And don't believe me over him, believe the 100's of thousands of Dr.'s past and present who have provided evidence for EMT.
 
You must log in or register to reply here.
Back
Top