tag:blogger.com,1999:blog-4003618.post8229643536342949396..comments2023-01-27T11:32:29.724-08:00Comments on Piaw's Blog: Misunderstandings of the Efficient Market Hypothesis can be a serious threat to your financial healthPiaw Nahttp://www.blogger.com/profile/15582578691900817661noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-4003618.post-34303637085928980822009-03-18T23:27:00.000-07:002009-03-18T23:27:00.000-07:00It has been presumed that the stock market prices ...It has been presumed that the stock market prices cannot be predicted in the light of Random Walk hypothesis that contrasts the basic tenets of Efficient Market Hypothesis. But there has been ongoing attempt from researchers around the world and one by particularly undertaken research to contradict this evidential inference about the proximity of deluging the ‘Random Walk’ theory. <BR/><BR/> There has been one important findings reported in SSRN website titled ‘Calculating Stock Market Index Closing Value Using Risk Function Curve Equation, Logistic, B-Spline Curve and Polar Conversion techniques’ which catapults and attempts to accurately measure the intraday ranges of an index using Risk Function Curve. What this paper says is that, stock prices and index movements can well be predicted mathematically using the simple equation mentioned in these paper. The equation uses index variables to compute and provide a range of values which has been tested consistently, and found out to be non-erratic.<BR/><BR/>However, it is difficult to understand the basis of this particular equation wherein, some strange forces have been acting to compensate the changes in variable units. This particular equation modifies the ‘r’ function, or the risk function that helps to deduce how much risks are there in a market, thus quantifying the amount of risk of an index for a particular day.<BR/><BR/>The author points that by keeping the other variables constant; one induces changes in value in ‘r’ in the equation which gives the output range, and often the true exact closing price that the index may close on that particular day.<BR/><BR/>I find this event violate the random walk theory and EMH principles in question some what arbitrarily. Then, shall it be mentioned here that index closing prices can be accurately predicted using mathematical functions? And then, why is that happening?<BR/><BR/>And if this is the case, then it would create trouble in the financial world and markets where one would basically apply any trading positions (index long or short) in advance which would rather bring more inefficiency within the markets or in other way, bring perfect efficiency thereof remains particularly to be known.kenethwonghttps://www.blogger.com/profile/15324729450160873648noreply@blogger.com