How would you define uncertainty in a market context? The market seems to maximize its closes and opens and other bench market prices so as to maximize uncertainty among all the players so as to maximize trading of all systems and beliefs?

Pete Earle writes: 

The market is the kind of fighter that either jumps on you at the bell in the first round, testing your defenses and seeing if it can catch you cold ("dry"). It is also the type to, in the last round, or last minute or so of the last round, burst forth with brutality and attempt to catch you while you're tired or confident about a win. 





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2 Comments so far

  1. Andre on November 2, 2016 12:20 pm

    vix and average true range yield to constructal law of liquidity. Some optimal level of liquidity exists relative to assets that seeks to be maintained by market but market over and under shoots. This must look like a macd oscillation. at market peak in 2007 floor trader said to me too much liquidity too few assets and how is it any different today bsides low rates pushing things more extreme?

  2. Edward Lam on November 4, 2016 1:45 pm

    I would suggest that market exchanges present (relatively) ordered uncertainty. Whilst markets with centralised exchanges do gap up and down, the centralisation and constant trading during the day imposes a structure. The probability of one price following another during the day is higher if the price is nearish the last price.
    I speculate that this contrasts with markets without exchanges or markets in transition, where pricing is liable to be more random and more jumpy. An example of this is the transition from non-central to centralised pricing in an IPO. The probability of a big price movement up or down the day of an ipo is much greater than at any time thereafter, but potentially reflects the volatiility/randomness of bid-offers in a non-centralised exchange environment.


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