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If you perceive some pattern in stock prices, you can bet on the continuation of the pattern. If there were commonly discernible patterns to prices, everyone wi
by drfxyjhdyfrhgc 5y ago
If you perceive some pattern in stock prices, you can bet on the continuation of the pattern. If there were commonly discernible patterns to prices, everyone with cursory knowledge of finance would become magically rich.
This can't happen because prices rise as a consequence of buying and fall as a consequence of selling. People who bet on a pattern destroy it.
The consequent randomness is easily verifiable. Try running some stock market data through a machine learning library, you won't get any interesting results.
- DSingularity 5y agoHave you tried? You would be surprised at what can be achieved on smaller time frames.
- dash2 5y agoBut there is a thriving industry of spotting patterns which other people haven't yet thought of. And IIRC there is some evidence that even after these patterns are discovered in the academic literature, they persist for a while, just with lowered returns. The logic of what you're saying is true in principle, but in practice markets are not quite so perfect.
- drfxyjhdyfrhgc 5y agoIt wasn't my intention to give the impression that markets are totally efficient, just that the forces at play tilt the system toward increasingly random behavior. I was responding to the proposition that markets are considered random because "TradFi economics has decided it must be".