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The best answer to your question: back test your ideas against historical data. If you think you can predict the market by learning past patterns prove it by testing it, not by discussion. I've done mistake few years ago and fell in love with one idea, which seemed to be like money printing machine, but instead testing it, I spent month discussing it on ...


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Given the well-known stylised facts of equity markets, I would go for a generic stochastic volatility model where log-asset prices, hence geometric returns, are driven by a standard Brownian motion (although this would explain the lack of returns' auto-correlation, it would also boil down to assuming their independence, which is a stronger assumption). ...



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