**Subject: **Re: fuzzy finance

**From: **Paul Victor Birke (*nonlinear@home.com*)

**Date: **Sun Feb 20 2000 - 17:36:09 MET

**sorted by:**[ date ] [ thread ] [ subject ] [ author ]**Next message:**Someone Insignificant: "Q: Implementation of an Associative Memory Lookup Index"**Previous message:**Adel ALIMI: "Invitation to ACIDCA'2000"**Next in thread:**Paul Victor Birke: "Re: fuzzy finance"

PGreenfinch wrote:

*>
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*> The ERT / Efficient Market Theory sustains that there is only one possible
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*> asset price at a given moment, the condition being that the market be deep
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*> and liquid enough and fully informed.
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Must be wrong. There is a Fuzzy Price! The price quoted is only one of

a possible number from a small interval set. Usually a Uniform

Distribution defined by {PriceLOW, PriceHIGH} also there is another way

using a sort of Trapezoid FF with {PriceULTRALOW, PriceLOW, PriceMEAN,

PriceHIGH,PriceULTRAHIGH}. The Ultra values define the Trapezoid

boundaries having zero membership value. The Low and High define the

limits of the membership = 1 Uniform Distribution. The Mean may or may

not be in the centre between Low and High.

*> The price, with this theory, would result from the stock's "fundamentals"
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*> - expected profit (future earnings per share),
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*> - rate of return (by reference with the "riskless rate", measured by the
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*> government bond's rate, to which is addes a risk premium linked to the stock
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*> volatility (standard price deviation)
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*> - a beta coefficient linked to the correlation between the price of the
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*> stock of an individual company, and the prices in the whole market, measured
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*> by a market index).
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*> Well, in practice, stock prices behave more wildly and fuzzily.
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Exactly.

*> Can anyone tell me if my pricing model (that uses behavioral finance and
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*> gives a much broader potential price range than the ERT) has some
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*> resemblance with fuzzy models, and if that could lead to further research
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*> using fuzzy logic tools ?
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Must be so. Sounds more realistic. Fuzzy Finance is slow to come on.

I found a guy at Michigan State about 4 years ago doing a masters on

fuzzy accounting. It gives you the strong impression that Fuzzy

Financial applications are real.

This leads to ideas of Maximized Fuzzy Expectation. You could only find

a few papers on this a few years back.

Why is everyone so slow on the pickup here. Likely disturbs existing

paradigms for sure.

That is what I found!! Too complicated for Management!!

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

*> _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
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*> Behavioral stock pricing:
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*> http://perso.wanadoo.fr/pgreenfinch/
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