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To: GraceZ who wrote (148183)	2/4/2002 2:08:50 AM
From: At_The_Ask	Read Replies (1) \| Respond to of 436258

What he states about all public news being reflected promptly in the price of a stock is a basic tenet of technical analysis. It goes even further than that because a chartist believes he can see not only what the public knows, but also what smart money knows and is acting on behind the scenes. Markets move based on the emotions of the participants in the buying and selling process. How often do we see bad news come out and yet the markets go higher? Or good news and the markets sell off? A technician listens to what prices are telling him. "Bad news, the markets keep going higher, something is up! I need to buy." It's pretty much like tape reading but on a larger timescale. I believe that prices that are attached to stocks have absolutely no basis in reality. If there was any means that could effectively price stocks there would be no chance for profit. Some giant computer would calculate the price of everything and that would be that. I would go as far as to say that stocks are always Incorrectly priced. Investors are cats in a room full of rocking chairs. Wanting to find a good place to sit but constantly in danger of getting their tails smashed. So they eternally run from danger to perceived safety. Often they find me there, at the ask, with safety for sale at a reasonable price. ;-)

To: GraceZ who wrote (148183)	2/4/2002 2:24:10 AM
From: Simba	Read Replies (1) \| Respond to of 436258

The excerpt from Eugene's interview does not entirely support the "random walk" theory. Eugene uses 2 data points from history to support a prediction about the tails of distribution. He says that the distibution mean is the expected rate of return and the distribution is symmetric around this expected rate of return. If crashes are rare events as they are, then one needs more than two events to get statistically significant predictions on the tails of a distribution or to make conclusions on the symmetry/assymmetry of a distributions. I think there are more supporting scientific evidence than this interview. << You should have asked me, if stock prices were completely random how could they be bounded by expectations. Now if you really want to put your head in a twist, the same guy who gave you "random walk" also gave you "The efficient market thesis" , Eugene Fama. dfafunds.com. Read this short interview and tell me if this small section makes sense to you in terms of how you understand random walk and/or efficient market: Tanous: But if ’87 was a mistake, doesn’t that suggest that there are moments in time when markets are not efficiently priced? Fama: Well, no. Take the previous crash in 1929. That one wasn’t big enough. So you have two crashes. One was too big [1987] and one was too small [1929]! Tanous: But in an efficient market context, how are these crashes accounted for in terms of “correct pricing”? I mean, if the market was correctly priced on Friday, why did we need a crash on Monday? Fama: That’s why I gave the example of two crashes. Half the time, the crashes should be too little, and half the time they should be too big. Tanous: That’s not doing it for me. What am I missing? Fama: Think of a distribution of errors. Unpredictable economic outcomes generate price changes. The distribution is around a mean—the expected return that people require to hold stocks. Now that distribution, in fact, has fat tails. That means that big pluses and big minuses are much more frequent than they are under a normal distribution. So we observe crashes way too frequently, but as long as they are half the time under-reactions and half the time over-reactions, there is nothing inefficient about it. >>