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
Ah, you do realise that his whole hypothesis was based on a trial from a randomly generated chart interpreted by one person, which you think qualifies as an empirical study defining the essence of the markets.
Malkiel obviously didn't, but don't you see how incredibly preposterous this hypothesis is?
Seriously? You think Cohen had to hold as long as Buffett?How would s scholar or anyone know whether or not buffett is privy to market information?
Surf, I'm sorry but sometimes you really walk into it.If the markets are not random, how can they exist? What prevents them from being "cornered" or exploited out of existence?
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.
Surf, I'm sorry but sometimes you really walk into it.
The market has an endless supply of participants with your talent for trading.
That provides the snacks for the banks and hedge funds.
There is more than one bank and more than one hedge fund.
It's a zero sum
Quote:
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.
End.
Meaning,
1) he has found price movements that could be exploited by trend following methods
2) said movements showed a major departure from randomness
3) such was proven by his application of standard statistical measures.
Have I missed anything?
You've come to the point where you are arguing for the sake of arguing and that is really a waste of time.Yes, you are not understanding. But that's ok.
surf