Changing Market- A Fallacy ?

[A Dashing Blade]

Chaos theory . . . too many people have lost too much money trying to apply that one to the markets!

At the end of the day it seems to me that it boils down to the degree of statistical normality in the curve of market returns.

 

[Lightning McQueen]

No, you haven't missed any point. In my original post I mentioned both EMH and Behavioural finance. I wanted to understand more about what a "Changing Market" means. The theories describe how a market behaves but not exactly why it would change.

"A growing field of research called behavioral finance studies how cognitive or emotional biases, which are individual or collective, create anomalies in market prices and returns that may be inexplicable via EMH alone."

This implies that the market is unpredictable, or is better explained by chaos theory?

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

I dont personally think we dont need to know or understand why markets change but be able to see the change early enough to be be able to trade that change for a profit

as I write this I see that Dashing Blade confirms my thoughts on this

 

[Tuffty]

The theories describe how a market behaves but not exactly why it would change.

My thoughts on this are:

There is only one real constant in the markets and that is the primeval human nature of people.

All other things are in flux. The structure of the markets are always changing. The sort of things that change are market regulation, instruments, the law, investment regulation, technology, availability of capital and credit, types of market participant, etc. etc. etc.

(Don_h Not got the Jet Ski title yet!.....I was just lucky...found it best not to look at the score while playing....maybe I should do that with trading !!)

 

[Lightning McQueen]

My thoughts on this are:

There is only one real constant in the markets and that is the primeval human nature of people.

All other things are in flux. The structure of the markets are always changing. The sort of things that change are market regulation, instruments, the law, investment regulation, technology, availability of capital and credit, types of market participant, etc. etc. etc.

(Don_h Not got the Jet Ski title yet!.....I was just lucky...found it best not to look at the score while playing....maybe I should do that with trading !!)

Hi Tuffty
your jetski title is well safe from me at the mo im well down in 80th place

Top idea that Tuffty take away the price and volume leaving only indicators what ya got then is the worlds best arcade game :cheesy: (I can already feel the heat of the flames from the price and volume only gurus)

you couldnt get more K.I.S.S. than this other than buy hold and pray

 

[swandro]

Chaos theory . . . too many people have lost too much money trying to apply that one to the markets!

At the end of the day it seems to me that it boils down to the degree of statistical normality in the curve of market returns.

On the subject of chaos and statistical normality (in the markets), I would recommend a book called "The (Mis)behaviour of Markets" by Benoit Mandelbrot. You will know this name of course - he is the scientist who brought fractals to the world and is a leading chaos theorist.

I have not finished reading it yet so I cannot relate to you the complete story, but basically he is taking a look at the question - do markets follow any kind of statisical pattern? According to standard market theory they do, but Mandelbrot says - you've guessed it - they don't.

It is a very easy read - not a single mathematical equation - and very relevant to anyone interested in the theory of markets.

It is subtitled - "A fractal view of risk, ruin and reward". That gives you a clue as to where he is going with this book.

 

[A Dashing Blade]

On the subject of chaos and statistical normality (in the markets), I would recommend a book called "The (Mis)behaviour of Markets" by Benoit Mandelbrot. You will know this name of course - he is the scientist who brought fractals to the world and is a leading chaos theorist.

Been banging on about that book on these boards since last Sep!