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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: At_The_Ask who wrote (148155)2/4/2002 8:42:21 AM
From: Real Man  Read Replies (2) of 436258
 
Yes. But the markets are not random walk. The proverbal "fat powerlaw tails" in the distribution are a proof to it. The tails are described by Levy distribution, not a Gaussian (random walk). But this also means you always have risk in the markets, you cannot construct an ideal hedge. The Hurst exponent in most cases is greater than 1/2, meaning it's not random walk, and such things as trends do indeed exist. In fact, if you measure a Hurst exponent for a stock, the closer it is to 1/2 (Random walk), the more difficult it will be to apply any kind of TA to it. Markets are fractal in nature, since there are participants willing to buy and sell at different time scales. In fact, that may be the only "stable" distribution: If they are not (i.e., buyers at longer time scale disappear), markets become unstable and can crash. Stable, and different from "efficient"
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