3 ms·
"In particular, there is no reversion to the mean... there are going to be literally hundreds of papers exhibiting some reversion to the mean effect." Okay.
by cynicalkane 11y ago
"In particular, there is no reversion to the mean... there are going to be literally hundreds of papers exhibiting some reversion to the mean effect."
Okay.
I also think you don't know what a martingale is. It is impossible to make any expected value betting on martingale movements, by definition. If you believe traders are purely "betting on price movements" of martingales then profit is impossible. So either prices aren't martingales or trading is not purely a process of betting on the movements of market-clearing prices. Actually, both assumptions are false.
- JesperRavn 11y agoIf you knew anything about academia, or if you even bothered to carefully read my post instead of nitpicking, you would understand that just because something is in general true, doesn't mean that there won't be hundreds of papers showing how this thing fails to be true in special cases, or to a very small extent. Regarding martingales, a martingale is defined relative to an information set (you know what a martingale is so you already knew that, right?). Saying that there is no reversion to the mean implies being a martingale with respect to the weakest possible information set (the history of prices). Traders, whether high frequency or others, may have extra information outside this information set. In short, stop nitpicking and revise your understanding of what a martingale is.