Don''t let these guys fool you. The stock market is very simple. It''s extremely random. Stocks will move up or down randomly every day, with a slight bias toward moving up, since stocks generally gain in value over time (At a rate of about 8 or 9 percent or year on average)

You should treat most of it as random data, though. Most of the ''patterns'' in the stock market are just human attempts to impose patterns on a random phenom.

Success of fundamental anaylsis, the neural net kind of thing mentioned above, and the other tricks in the bag are just a consequence of the upward trend of the stock market. I could let a blind monkey with asthma choose my stock purchases and get a good return.

I guess it''s important to remember the purpose of the stock market: as a way for companies to raise capital - generally to fund things like expansion & therefore increase the the capital value of the firm & [hopefully] your stake.

quote: Original post by Anonymous Poster
Don''t let these guys fool you. The stock market is very simple. It''s extremely random. Stocks will move up or down randomly every day, with a slight bias toward moving up, since stocks generally gain in value over time (At a rate of about 8 or 9 percent or year on average)

You should treat most of it as random data, though. Most of the ''patterns'' in the stock market are just human attempts to impose patterns on a random phenom.

Success of fundamental anaylsis, the neural net kind of thing mentioned above, and the other tricks in the bag are just a consequence of the upward trend of the stock market. I could let a blind monkey with asthma choose my stock purchases and get a good return.

Run along, son. The boy has a serious question... let''s give him a serious answer. As for your theory? Imagine all of the independant, random events that lined up all in a row for Enron to go from $90 to 35 cents in a year. Wow... that''s like flipping tails 3000 times in a row. Aparently the sightless asthamtic simians were on strike this past year.



Dave Mark
Intrinsic Algorithm Development

quote: Original post by Anonymous Poster
I could let a blind monkey with asthma choose my stock purchases and get a good return.

Sure. The stock market was great in late ''99. That''s why I realized a 1100% return in 6 months with a portfolio of about 8 stocks making new highs. Undoubtedly anyone anywhere (including your blind monkey) would have realized the same return.



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How do you explain the general failures of mutual fund managers, then. Surely some trained professional, somewhere, would be as good an investor as you, and generate those kinds of returns reliably?

That doesn''t happen. Why? Because the stock market is impossible to predict. Sure you got great returns, but you are a statistical outlier, not the norm. Keep investing long enough and your returns will regress to the mean.

quote: Original post by Anonymous Poster
Because the stock market is impossible to predict.

Just because it seems to go over YOUR head doesn''t mean that it is impossible.

quote: Keep investing long enough and your returns will regress to the mean.

If that were the case, all of the major market indexes would be exactly where they were 20, 30, 40... even 70 years ago. Your statement is foolish. Methinks you better retreat back to threads that are in your area of expertise... whatever that may be.


Dave Mark
Intrinsic Algorithm Development

There is absolutely no need for ANYONE to make personal comments about another member of this forum. I''m not singling out anyone in particular, but this thread is degenerating fast. Either clean it up or I will close it.

Timkin

Here is an idea for a simple stock market simulation, since that was what was asked for in the original post...

The buying and selling of stocks works on an open market place principle. People are free (there are some restrictions but we wont go into them here) to bid and ask whatever they like for stocks. An broker places stocks into the market and asks for a price per share. Other brokers bid to buy the share. Many modern stock exchanges today run on computers, like the ASX in Australia. The computer matches buyers and sellers in a time critical order (so oldest bids are matched with oldest asks. Usually what you see if you look at a days trading of the stocks of a particular company is that most people buying are bidding less than the stated market price, while most people selling are asking more than the stated market price. There is another option to buying or selling of shares (no pun intended) and that is to bid or ask at the current market price. This normally results in a quick trade as the market price (usually) falls between the average bid and ask prices. The market price is an estimate of the value of each share based on all bids and asks to date.


So, you could make a stockmarket simulation by creating 100 agents and giving them all some cash (don''t give them all the same amount). Have just 1 stock for them to trade in. Create for each agent a different buying and selling strategy (or have groups of investors with similar strategies) and then set them free in the market to buy and sell shares according to their strategies. Watch what happens to the value of the stock as the simulation runs. You''ll notice that either a) the moves to a fixed value and stays there; or b) the price oscillates between several values; or c) the price fluctuates apparently randomly between many states. How the market performs depends on how you tune it and the complexity of the bid and ask strategies. You''ll need to play with it a little to get it into state ''c''.

Holler if you need more suggestions.

Cheers,

Timkin

quote: Original post by InnocuousFox


If that were the case, all of the major market indexes would be exactly where they were 20, 30, 40... even 70 years ago. Your statement is foolish. Methinks you better retreat back to threads that are in your area of expertise... whatever that may be.

You misunderstood. I said that the _return_ will regress to the mean. This is different than saying stock prices do not move. The average return on the S&P is 9 or 10% per year. Keep investing long enough, and your life time returns will approximate the average stock market return more and more.

With that in mind, do you have a non-hostile response to my argument? I''d really love for someone to prove me wrong, since I would then have access to a system better than the buy-and-hold and index fund strategies I currently use.

quote: Original post by Anonymous Poster
How do you explain the general failures of mutual fund managers, then?

Easy. They offer a service 365 days a year to invest your money in investments which follow the guidelines of their prospectus. On the other hand, I leave the stock market for large periods at a time and dive in fast and furious with heavy margin risk for short periods of times.

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