Stock Art of War Random Walk Theory Money Tips

Category: Money tips Release Date: 2007-01-20

All charts were the existence of the trend value, are based on an assumption that the stock, foreign exchange, gold, bonds. All investments are subject to economic, political, social factors, and these factors will continue to repeat the same as the history. For example, if the Great Depression, the economic recovery, property prices, stock market, and gold will be steadily increasing. L End will be down, but will rise too high or finished. Even if the short term, all investments dominate the law of value is inseparable from the factors mentioned above, as long as investors can predict some of the factors which dominate the price, they can predict the future trend. In equities, chart trends, turnover, price, etc. reflects the mentality of investors tend to. This kind of mentality whereabouts constitutes a reason for denying their income, age, the message understanding, acceptance digest the extent of confidence in the heated, all reflected by the share price and turnover. According to the chart you can predict the future price movements. However, the random walk theory, opposes this view, contrary to the opinion.

Random walk theory that the stock market there are thousands of smart people, not all ignorant people. Everybody knows how to analyze, but the information into the market are all open, everyone can see, there is no secret at all. Now that you know, I know, the stock price already reflected the current relationship between supply and demand. Or a value in itself not be far off. The so-called intrinsic value of the measure is to look at asset value per share, price-earnings ratio, dividend yield and other basic factors to decide. Of these factors is not any big secret. Each individual to open a newspaper or magazine can be found in these materials. If a stock asset value of ten-dollar, breaking the market will not change to the value of 100 yuan, or one dollar. Market, no one out of 100 yuan to buy stock or sell a dollar. The current market price of the stock has already represented the 10 million eye-catching views of those who constitute a reasonable price. Market price will be around the intrinsic value fluctuate. These fluctuations are random, without any trace to be found. Fluctuations made because:

(1) The new economic, political, news is arbitrary, there is no fixed way onto the market.

(2) The news of the basic analysis to re-estimate the value of the stock, while the principle of making the sale, resulting in new changes in the stock place.

(3) because these messages without a trace could be found, is sudden, there was no prior notice of one can estimate that the stock trend is not going to speculate it could be set up, charts were talking about is just nonsense.

(4) Since all the shares in the market price had already reflected in its core values. This value is a fair decision by the buyers and sellers, this value will not change again, unless the unexpected news, such as war, acquisitions, mergers, interest rates cut in interest rates, oil and other good war or a profit until light and so the message appears again fluctuations. But the next news is good or facilitate short we do not know, so the stock is now no memory system. Does not represent today l yesterday l. Today or tomorrow you can l can also be dropped. Between day and another not related to the ups and downs. Just like throwing copper, as this throws a positive does not mean that the next roll will be another positive, the next time the roll will be a positive or negative rate of 50% of each opportunity. No one would know the next one must be below or negative.

(5) Since the stock is not memory system, and attempt to find a theory of stock price volatility over the market, won the big city, all will lose. Because stock prices have no direction, random walk, l chaos or disorder. We can not predict the movement of the stock market, no one certainly must be a winner, no one will lose. As for the role of the stock of experts is not a matter of fact one can even say entirely meaningless. Expertise because they are so, then certainly his fortune with these theories, where the study will be published so that others developed?

Random walk theory to the chart is undoubtedly a positive enemy camp, if the random walk theory, the establishment of all stock experts have no place. Therefore, many scholars have conducted research to see if this theory's credibility. Among the numerous studies, there are three studies, in particular support the random walk of the argument:

(1) There was a study by the U.S. Standard & Poor's Index (Standard & Poor) stock for long-term study found that the stock spiraling or crash, the spiraling four or five times, or down 99%, the ratio is only a very small number, most of rise and fall of the stock are 10-30% range. There was a statistically normal distribution phenomenon. That accounted for the greater decline in the proportion of l less. Therefore, no single trend in stock prices. Depends on whether you are lucky to buy stocks, buy stocks rise or fall in shares of equal opportunities.

(2) In addition, a pilot, there is a U.S. senator to go with dart throwing to a financial newspaper, picked up 20 shares as a portfolio, the results of this chaos to the portfolio and the stock market went so far as the overall performance of similar, but not less than that of experts They suggested the portfolio, or even more than some expert advice outstanding performance.

(3) has also been studied units in the Fund's performance and found good results this year, next year may be the worst behaved, a number of disappointing fund in previous years, this year, might emerge as top growth. So, no trace could be found to buy funds also depends on your luck, investment technique is not practical, since the stock market does not remember, we are just blind guesses.

Random walk the general point of view is: the buyer and the seller different from clever wit, the seller and the buyer has the same clever wit. They are able to access the same information, so both buyers and sellers believe that the price is fair and reasonable, the transaction will complete; exactly reflect the stock price in real terms. A result, stock prices can not be buyers and sellers can guess the simple, systematic changes in circumstances. Basically, there is a price change random.

The real meaning of this statement is that there is no unilateral able to overcome the stock market, stock price already reflects all of the, but no systematic change in stock price. Naive stock picking methods, such as facing the newspaper's stock version of throwing darts, it still can be elected beat the market portfolio.