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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Thomas Mercer-Hursh who wrote (25440)	5/30/2000 4:02:00 AM
From: mauser96	Read Replies (1) \| Respond to of 54805

I must admit to using mathematics only when I have to . I find it much like a trip to the dentist, useful and necessary, but not my idea of as fun morning... Free markets like the stock market usually show a larger number of high sigma events than the random market theory says they should. In the case of the S&P, 3 and 4 SD are about as common as 2 SD. This is only one of the strong pieces of evidence pointing to the fact that markets are not truly Gaussian. The figures I've seen published deal with S&P or the DJI, and I would expect the distribution curve of events in the NASDAQ to show even fatter tails. If so, the whole idea of examining non random events with statistical methodology designed for random events may be open to questions. Despite this theoretical issue, I've found high sigma events useful in indicating that the mechanism of the market, whatever it is, has temporarily broken down. Sometimes the market acts like a football game where occasionally the rules of the game are changed without telling any of the players. Suddenly it's only 3 plays to a first down, and it takes 12 yards to get one. Then just a suddenly it's back to the old rules. In a way these high sigma events are telling us a rule change is in progress.