Re: fuzzy finance


Subject: Re: fuzzy finance
From: PGreenfinch (pgreenfinch@wanadoo.fr)
Date: Fri Feb 25 2000 - 11:12:44 MET


Dale Johnson a écrit
>Perhaps you should use the same method that actual investors use.
>
>They listen to the media, people in chat-rooms, and analysts who
>say one thing, but do another. They play hunches, feel fear and
>greed.
>
>See, if you use your very proper and logical methods, you are saying
>that the average investor is proper and logical. >

Thanks again to feed the debate.
Well, who knows if it is the average investor that makes the market ?
I have strong doubts about that, at least these days (although that would
put my own theory temporarily into parenthesis, and I should replace my
"image" coefficient by a "manipulation" coefficient).
Well, for the sake of the debate, let us suppose it is the average investor.
There is an expression in French theater plays (I suppose there is an
English equivalent in Hollywood, but sorry, I don't know it) that is
"comique de repetition".
Well, it applies to human behavior, and thus to stock market behavior.
Since the tulip bubble of the 17th century, there are repetitive phases of
overpricing and underpricing.
Of course, it is not logical, but where you see ruts you can measure their
width (range of price), and identify the vehicle (current paradigm of
evaluation).
Playing the market is an art and a sport, not a science, I fully agree.
And the good old Markowitz / Sharpe CAPM (Capital Assets Pricing Models) is
full of holes and sinking.
But to draw a few lines on the ground, which is what my own model tries to
do, could be of some use :
- if you are doing Short Term trading, to see when the ball is going off
limits and ask yourself if it is not the moment to take a fast decision.
- If you are doing LT assets management to make price comparisons between
various stocks (and other assets), and make your money allocations between
them
Well, what is said for ST can apply to LT, and the other way round, another
thing where I don't see any dogma, but common sense.
PG

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