3 ms·
stock prices Do vary randomly.
by gcb0 10y ago
stock prices Do vary randomly.
- rjtavares 10y agoI'm assuming that is a reference to the random walk theory. That theory suggests that "the past movement or trend of a stock price or market cannot be used to predict its future movement". It's random in the sense of unpredictable, not in the sense of actauly being determined by chance. The implication of the random walk theory is that current information is already uilt into the price of the stock. That is only true insofar as there are active traders acting on that information. The parent is merely explaining why those traders will exist, and why you only need a small part of the market to actively trade.
- hueving 10y agoRandom walk depends on all participants acting rationally based on the same information released at the same time. However, index funds are not rational, they always buy in the same ratios regardless of news.
- aangjie 10y agoI'd suspect all those HFT firms will have robot agents (trading based on some ratios/logic) as simulations for their testing environment.