Re: fuzzy finance


Subject: Re: fuzzy finance
From: Paul Victor Birke (nonlinear@home.com)
Date: Fri Feb 25 2000 - 13:36:13 MET


Dale Johnson wrote:
>
> 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. That's where I
> disagree. People say the PE is at 120 because of "long term growth
> prospects", but it's because everyone is chasing the stock, when
> it goes south to have a PE of 22, then people say that "there were
> doubts than management could execute" when actually, everbody
> jumped the bandwagon because a bunch of shorts spooked the
> market, and the company has one bad quarter.
>
> I don't think that markets always work like this, but because everyone
> is in this market for a week or two instead of six months or five
> years, its acting stupid.
*****************************************************

Dear Dale

For sure what you say is true!

But it is a partial observation and does not take into account the
>>Whole Set<< of persons playing.

There must exist a Fuzzy Pareto Distribution of Investors (FPDI). From
those who react to the slightest nuance to those that are there in the
long term and are kinda wise and determined and have done their
homework, so to say. It could be also that there are those stocks in
which this FPDI is advantageous in the sense that it is loaded with
these wiser long term investors. Again perhaps on these stocks money
made not be made so quickly. So now we may suggest some kind of Optimal
Fuzzy Pareto Distribution of Investors of FPDI* in which there is enough
investors who are >>stable<< and not >>psycho-sensitive/herd-sensitive<<
but still you could make some bucks. Therefore, find the Goldilocks
FPDI* set of stocks!!

Suggestion only as to what the model may look like.

Paul V. Birke, P. Eng. NN Researcher in Guelph ON CANADA

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