> Ok I looked this up: ... > a discrete-time martingale is a discrete-time stochastic process (i.e., a
Right, I was referring to a martingale sequence in the context of the weak-form of the EMH. The weak-form information refers to technical analysis which, usually, is based on historical security prices. Some consider volumes, in addition to historical prices, as part of the technical analysis information. In such a case, > One form to present it is as follows: a random walk model stating that the sequence of (discounted) security prices is a martingale would support the weak-form of the EMH. > should be amended as follows: A random walk model stating that the sequence of (discounted) security prices is a martingale, with respect to the joint sequence of security prices and volumes, would support the weak-form of the EMH. > Koch Industries Inc.had the power to game and manipulate markets from both the speculative and physical ends—something that even the most powerful investment houses can’t do on their own. Let us assume, for the sake of the argument, that it has been firmly established that, what you state, is actually the case. It would not matter much anyway because many markets are very liquid and the difference between the bid and ask prices are very tight and the transaction costs are very low. Thus, again, if one perceives, for example, that a future energy contract is underpriced (overpriced), due to manipulation, then one could buy (sell) it and expect to sell (buy) it at a higher (lower) price later with the expectation of generating a profit (unless one has a paranoid belief that after one places a trade the market will be manipulated just to hurt one's trade). > Best part is: only insiders know how much or how little manipulation exists because the derivatives are exempted from regulation. Some derivatives are and some are not exempted. On Fri, Aug 23, 2019 at 10:46 PM Donna Y <[email protected]> wrote: > > Ok I looked this up: > > > Originally, martingale < https://en.wikipedia.org/wiki/Martingale_(betting_system)> referred to a class of betting strategies <https://en.wikipedia.org/wiki/Betting_strategy> that was popular in 18th-century France < https://en.wikipedia.org/wiki/France>.[1] < https://en.wikipedia.org/wiki/Martingale_(probability_theory)#cite_note-1>[2] <https://en.wikipedia.org/wiki/Martingale_(probability_theory)#cite_note-2> The simplest of these strategies was designed for a game in which the gambler <https://en.wikipedia.org/wiki/Gambler> wins their stake if a coin comes up heads and loses it if the coin comes up tails. The strategy had the gambler double their bet after every loss so that the first win would recover all previous losses plus win a profit equal to the original stake. As the gambler's wealth and available time jointly approach infinity, their probability of eventually flipping heads approaches 1, which makes the martingale betting strategy seem like a sure thing < https://en.wikipedia.org/wiki/Almost_surely>. However, the exponential growth <https://en.wikipedia.org/wiki/Exponential_growth> of the bets eventually bankrupts its users due to finite bankrolls. > > a discrete-time martingale is a discrete-time stochastic process (i.e., a sequence of random variables)… ...the conditional expected value of the next observation, given all the past observations, is equal to the most recent observation > > I should have used conditional expected value instead of saying the random walk model predicts. A random walk model is a Martingale. > > > Equivalent Martingale Measures is a probability distribution that shows possible expected payouts from an investment adjusted for an investor's degree of risk aversion. In an efficient market, this present value calculation should be equal to the price at which the security is currently trading. Equivalent martingale measures are most commonly used in the pricing of derivative securities, because this is the most common case of a security type which has several discrete, contingent payouts. > > I don’t have any experience with other than what happened with Enron and Entergy-Koch. Koch Industries Inc.had the power to game and manipulate markets from both the speculative and physical ends—something that even the most powerful investment houses can’t do on their own. Best part is: only insiders know how much or how little manipulation exists because the derivatives are exempted from regulation. > > David Koch died today. > > > After David's death, his nephew Chase, the son of Charles, is in line to take his uncle's place as a key figure in the Koch network. > > > Donna Y > [email protected] > > > > On Aug 22, 2019, at 10:10 PM, Donna Y <[email protected]> wrote: > > > >> Depending on what someone's concept of "predicts" might be, the phrase > >> above could induce a misconception. One form to present it is as follows: > >> a random walk model stating that the sequence of (discounted) security > >> prices is a martingale would support the weak-form of the EMH. > > ---------------------------------------------------------------------- > For information about J forums see http://www.jsoftware.com/forums.htm ---------------------------------------------------------------------- For information about J forums see http://www.jsoftware.com/forums.htm
