Sep

19

After each missile test by North Korea, the reaction changes slightly. On the first ones, there is a big decline overnight, then a rally. On the second not so big an overnight decline. On subsequent ones, hardly a blip overnight with the rally in US trading the next day a little less. Can this reaction to information be generalized and quantified, and can predictions be made? Will a subsequent missile test actually lead to a rally overnight? The theory of information bits is relevant I think.

Gary Phillips writes: 

Recursive events sans any consequences has resulted in the market becoming desensitized to the disruption, the resulting effect much like a diminishing return. The same phenomenon can take place when one takes his first bad hickey, and realizes one's world hasn't come to an end. Becoming de-sensitized to risk or large losses can be very destabilizing to a trader.

Kim Zussman writes: 

"The market's like an aging lothario that continually needs its balls fluffed (by cb's) to get and stay erect."

-Fun Zayn Moyl in Gots Oyer


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