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location Aschaffenburg, Germany
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The stock market is a metaphor for life: "How to survive in a stochastic environment?"

I am proud member of the Bachelier Finance Society: http://www.bachelierfinance.org


Aug
22
comment Proof that you cannot beat a random walk
It seems to be possible to beat a (or n) random walk(s) nevertheless - see this paper: "The Paradox of Diversification" by Michael Stutzer, Abstract: Diversification maintained by rebalancing can easily turn individual assets’ negative returns into positive portfolio cumulative returns. Link: leeds.colorado.edu/asset/burridge/paradoxofdiversification.pdf
Aug
19
comment Proof that you cannot beat a random walk
See the follwing link for some simulations on volatility pumping: financialwebring.org/gummy-stuff/volatility-pumping.htm - so it really seems there is a way to beat a random walk after all...
Aug
19
comment Proof that you cannot beat a random walk
I think I don't get your point in its entirety. So you are basically saying that a random walk per se can be beaten when you assume that the behaviour of other traders doesn't have an influence on it? And are you saying that you can actually beat a random walk by volatility pumping (related: quant.stackexchange.com/questions/352/…) Could you please give references for your points or expand on them - Thank you!
Aug
18
comment Proof that you cannot beat a random walk
@D.W.: Good point: Both expectation and conditional expectation are 0 with a random walk. Thank you.
Aug
18
comment Proof that you cannot beat a random walk
...and to add to your point: What is wrong with Sornette? At least he is bringing some new ideas into the field. And in this article he shows that you cannot exploit the 75%-rule.
Aug
18
comment Proof that you cannot beat a random walk
@Brian: Do you know of any literature that does exactly that? I mean it seems intuitively the case but we all know intuition is not always the best judge when it comes to math...
Aug
18
comment Proof that you cannot beat a random walk
I am not so much trying to find a 1-to-1 correspondence to the statistical properties of the market. It is more a purely intellectual endavour to find out what underlying structure in a random process is exploitable (e.g. mean reverting random walk) and what is not. There is always some structure but it won't be always exploitable. I started with the well known (i.i.d.) random walk, but this can be broadened later on.
Aug
18
comment Proof that you cannot beat a random walk
Thank you. I think this is an important part of a proof but not the full story. E.g. a mean reverting process can also have an expected value of 0, yet you can exploit the underlying mathematical structure (see the paper above). A random walk also has some mathematical structure, the problem is to show that there is no way to exploit this.
Aug
18
asked Proof that you cannot beat a random walk
Aug
15
comment Indicators and research for stress-based investment strategies
CXO Advisory Group did research on a possible exploitability of this indicator: cxoadvisory.com/15599/economic-indicators/… - unfortunately the results are quite sobering.
Aug
15
accepted How did bans on short-selling affect the derivatives markets?
Aug
15
awarded  Popular Question
Aug
12
comment Papers about backtesting option trading strategies
Thank you, I updated the title and link.
Aug
12
revised Papers about backtesting option trading strategies
added 8 characters in body
Aug
12
comment How did bans on short-selling affect the derivatives markets?
Thank you, I rephrased it.
Aug
12
revised How did bans on short-selling affect the derivatives markets?
deleted 48 characters in body; edited title
Aug
11
asked How did bans on short-selling affect the derivatives markets?
Aug
11
awarded  Favorite Question
Aug
10
revised Indicators and research for stress-based investment strategies
added 247 characters in body
Aug
10
answered What are the best sources for equity quantitative research?