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I agree with you that there's a big difference between those two, but not in the sense that you mention. Adopting the "there's no reason" approach is akin to t
by Jun8 16y ago
I agree with you that there's a big difference between those two, but not in the sense that you mention.
Adopting the "there's no reason" approach is akin to treating the process as random. First advocated by Boltzman to lay the groundwork of statistical physics, this approach basically says that the process is so complex that the only way to deal with it is through probabilistic methods.
This approach in fact is widely used in analyzing stock markets. So in fact, the current wisdom is not to disregard the "noise" in the market to arrive at the "real" model, but to treat the whole market data as noise!
- timwiseman 16y agoAdopting the "there's no reason" approach is akin to treating the process as random. First advocated by Boltzman to lay the groundwork of statistical physics, this approach basically says that the process is so complex that the only way to deal with it is through probabilistic methods. I must respectfully disagree with you and agree with gxti. Based on the article, it seems that what gets a modelling career started to build up its momentum is virtually random. Once it is started its own momentum can sustain it for some time, but that start is random. Now, the market on a day to day basis is indeed virtually random. But the overall trends are not. Over the long term with general trends, the stock of strong companies will do well because they generate profits which are largely independent of the stock price. On the other hand, a high stock price might bolster an otherwise failing company for a while, but only for a while. Daily fluctuations are almost entirely random, but long term trend lines will tend to track the actual value of a company, with some exceptions.