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Companies never have a negative price. Also, just look at stock graphs. Companies are not priced by geometric browning methods. This is what I mean when I sa
by aetherson 2y ago
Companies never have a negative price. Also, just look at stock graphs. Companies are not priced by geometric browning methods.
This is what I mean when I say that it's usually not helpful to try to make claims about the world based on, "I'm really mad about the EMH." You end up making silly claims.
- em500 2y ago> Companies never have a negative price. Also, just look at stock graphs. Companies are not priced by geometric browning methods. Geometric Brownian motion can't take negative values either, so I don't know what you think this proves. While it's true that stock prices don't literally follow geometric Brownian motions (+drift), you can't tell the difference from stock graphs. (You can tell the difference with statistical tests if you know what to look for, e.g. volatility clustering, but humans can't tell by eye, and naive classification ML models will not perform well.)
- aetherson 2y agoI admit that I assumed that "geometric browning motion" was just "a random walk with more extreme movements when it goes away from the starting place," and that was wrong. What geometric browning motion in fact is, with some handwaving simplicity, is exponential growth with some jitter. I will note that "stocks are priced via geometric browning motion" would satisfy the EMH. And that the underlying growth trend of GBM, in a real world, is, like, "the stock market actually values real things about the company that you can find out, but which other people have already found out."