Central bank of IcelandOne states that "the market does move to levels consistent with the state of affairs…"

Quantitative Relativity indicates that markets do so but not in absolute terms, which is where EMH as a popularized theory appears to fail in its proof.

How can "all information" be filtered or assimilated or correlated into some collective pricing function or series of indicators? AW's opening statement seems apropos as a response.

Regardless of indicators and functions one may develop, adapt, promote, or swear by for purposes of pricing markets and their listings, what appears most elusive among industry know-it-alls and the smart-boys (as Truman called them) is understanding the relativity of information to pricing.

For instance, "On October 3 [2008] it was reported that Wachovia had rejected the previous offer from Citigroup in favor of acquisition by Wells Fargo, resulting in a legal dispute with Citigroup… On Wednesday night, October 8, the Central Bank of Iceland abandoned its attempt to peg the Icelandic króna at 131 króna to the euro after trying to set this peg on Monday, October 6… By Thursday October 9, the Icelandic króna was trading at 340 to the euro when the government suspended all trade in the currency… On Friday, October 24, stock markets plummeted worldwide amidst growing fears among investors that a deep global recession is imminent if not already settled in."

Are those October 3-9 information events invariant references that correlated to October 24 price action? As the chair likes to query, "how does one quantify it?"

The answer is that, yes, one can so quantify. The problem becomes a matter of conversion, whereby information is equated (to include discounted) into the currency of any given bid and ask.

Why a problem? Because electronic market exchanges are sanctioned, to wit: they are rules-based constructs. EMH is theory, and existing sanctioning paradigms do not formulate substantive (or objectified for that matter) informational parametrics into exchange systematics.

Designing FSM logic for order execution protocol, one can see how EMH is irrelevant for quantitative purposes due to its lack of invariance — see conservation laws in physics.

Actually, electronic exchange systematics provide that property of remaining unchanged regardless of changes in the conditions of measurement, not any given (weak, semi-strong, or strong) degree informational reference. With evolution of electronic information and exchange systematics a la the Internet, evidence supporting this relativity unremarkable yet popularized phenomenon (EMH) appears to be frequently if not increasingly rebutted or disproven.

In that price action represents a form of energy, informational invariance does not exist; therefore, the conservation of (non)directional indicators and functions is a fallacy… what the chair reduces as being "the constellation of current events and future cognizables and reasonable unknowables taking account of randomness in the process."

Could not have said it better…


See wikipedia on the Global Finance Crisis for cited references.


WordPress database error: [Table './dailyspeculations_com_@002d_dailywordpress/wp_comments' is marked as crashed and last (automatic?) repair failed]
SELECT * FROM wp_comments WHERE comment_post_ID = '5125' AND comment_approved = '1' ORDER BY comment_date




Speak your mind


Resources & Links