Finance

stock forecasts

stock forecasts

Postby blacksealv » Mon May 18, 2009 5:03 pm
The stock forecasts using log normal random walks shows several different colored forecasts. Which one applies? Also if you resubmit the ticker the forecasts completely change? Please explain on what we can rely? The top one? Can we generate different periods from the ones offered?
Thank you

Alistair Black
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Re: stock forecasts

Postby igo » Mon May 18, 2009 7:18 pm
Random walks are, by definition, random, so no one applies in the meaning of "rightness". Don't trust them to earn money.

I think it is more a game, a way to "imagine" possible ways of how a particular stock may evolve, following the pseudopatterns (no real patterns there) in the last months.
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Re: stock forecasts

Postby blacksealv » Tue May 19, 2009 1:34 pm
Thank you. Presumably there is nothing in Mathematica that can give reasonably reliable stock forecasts whether it is wavelets, using hidden fractals, underlying pattern recognition, probability theory, technical analysis, etc etc as they would not have used what you say is a useless format as the basis for their presentation on future prices. Any further thoughts would be appreciated. Thank you
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Re: stock forecasts

Postby gilbebo » Tue May 19, 2009 3:43 pm
If I remember correctly, any known information, prediction technique or expectation about the future is ALREADY incorporated at current price of the stock (e.g. if you think that pharmaceutical companies are going to earn "lots of money" because of aging population at developing countries -the ones that actually are the main sources of income of these companies- and you invest heavily on them, the likelihood is that "the price" already has incorporated this "common" belief and you cannot take advantage of it.

This lets the stock prices to a "random" evolution with "significant" ups and downs based on quite unexpected situations (e.g. Sept.11th kind of events, a severe illness of the charismatic CEO or an unexpected technology coming from a different field that wipes out the business profit core).

Any of this events, one recognized by the "market" are absorbed into price usually within minutes (or seconds) so difficult to exploit by anyone not really "inside it".

This leaves us basically with a "lottery game" without any probability of success attached to it (besides may be the 50/50 one).

That's why I tend not to believe anyone in a financial institution saying something like "interest will rise, or go down, or shares are cheap or expensive" because if they REALLY know, even by a cent of a dollar, they can earn milions trading with that "truth" by exploiting it selling or buying massively.
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Re: stock forecasts

Postby lagoonboy » Thu Aug 26, 2010 9:31 pm
While I accept all the foregoing explanations of how stock prices are believed to self-recalculate to incorporate all known features that might impact the future stock price, in the spirit of "answer engines (like WA) grab their knowledge from other free sources elsewhere on the web" I'd like to draw your attention to a module on the TradeMonster trading platform called "StrategySeek".

In the screenshot from their explanatory video at the URL below, you can see the recent plot of a stock's price (in this case an ETF) on the left, and then what looks like the colourful output from a jet engine over to the right.

https://docs.google.com/leaf?id=0B-2uvo7BEWfwYjAxYzYyOGEtNjVhMS00OTZmLThiNzctYWNlMzkyZjA2MjIz&hl=en

Click on the middle link "Open" at the Google Docs webpage to see it larger, and maybe also click on the image itself afterwards too.

Each colour is a range that the software has computed have the same probability of being achieved.

I don't know the basis for the algorithm, but would guess that "reversion to the mean" might play some part, and also extending recent historical volatility measures forward, plus maybe some inclusion of implied volatility, i.e. some statistical measures based on previous price variation simply extended into the future.

Of course, this is all conjecture on my part, and may in fact be computed from phases of the moon plus Antarctic weather data. :-)

Further, even if it computed that there was a 95% probability that a particular stock price would be at a certain price on a certain day in the future, the actual stock price could in fact be miles away, as you may find on that day that the stock price was exclusively influenced by a 5% probability event.

So as the other commentator has already said:

"all predictions of future stock price are baloney, and even statistically calculated predictions are just as useless".

However, maybe there is one slightly different scenario, viz. in those cases where the stock price over, say, the last 6 months has moved routinely between particular maximum and minimum price levels, i.e. it is trading within a range.

Often this price pattern does persist on into the future, but most stock-watchers get a bit apprehensive as the stock price approaches either the higher or the lower level, fearing it will finally misbehave and breakout.

And this can be a difficult time, because sometimes it does go uncharacteristically through a level that in the past has held firm, only then to retrace and start behaving itself again. This is the "false breakout" !

Perhaps WolframAlpha itself can perform some amazing calculations and then reliably draw a box around an area to the right of the current stock price plots, and declares how certain it is that the stock price will remain within those borders.

(An idea developed from a clever forex trading website called Oanda - see a screenshot of how you can place a forex trade by drawing a box to the right of the recent price action at:

http://fxtrade.oanda.com/forex_trading/fxtrade/fxbox_options/box_option_overview
).

I would guess that is the best you could reasonably hope for - but I am happy to be corrected, if anyone out there knows better, or if anyone would like to discuss further just how unpredictable future stock prices will be.
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Re: stock forecasts

Postby Jakes12345 » Tue Mar 15, 2011 7:13 am
The stock prices are surely unpredictable and many experienced marketers would fail to guess their returns. However, you could do a little bit without having too much of experienced in marketing by using implied volatility tool that can let you always close to the present market conditions. It's the collection of huge historical data which provides you present, past and future market conditions, so you would never have to fail on it.
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Re: stock forecasts

Postby briangilbert » Tue Mar 15, 2011 5:49 pm
You can rely on nothing. You have to be better than others at using the data available, deal through a company that does not skim off more than your gross profit and not put all your eggs in one basket. Virtually no speculator will have forecast the Japanese Tsunami and many speculators will have been wiped out by it.
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Re: stock forecasts

Postby Jakes12345 » Wed Mar 16, 2011 4:21 am
If the scientist is one who tells you before any disaster could happen, then there is a chance to stay away from any trouble like tsunami. The same rule is also applied to the market and no one rely on what happen next.
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Re: stock forecasts

Postby chicagobrownblue » Sun Jul 10, 2011 5:03 pm
Having the average price target from Wall Street analysts would be a useful feature. Google

Goldman Sachs price target IBM

to find the $160 price target for IBM. Whops, IBM just traded $176.49, so Goldman is too conservative. That said, I have had a very difficult time buying stocks in general above the Goldman Sachs target price. One stock I watch with a $69 target price traded up to $78 but then back down to $70.xx.

Goldman Sachs price target VZ

to find the $42 price target for Verizon which closed at $37.48. A friend of mine has been bidding $35 for VZ for months and just bought some a couple of weeks ago. When he called me I also bought more but paid just under $36. We both received the $0.4875 dividend. $42/$35 is 20%, add in a 5% or so dividend yield for a one-year expected return of 25%.

I follow a bunch of things for individual stocks and don't buy if there are a lot of known and unresolved issues.
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Re: stock forecasts

Postby chicagobrownblue » Sun Jul 10, 2011 5:16 pm
briangilbert wrote:Virtually no speculator will have forecast the Japanese Tsunami and many speculators will have been wiped out by it.


But some speculators were short Japan due to sluggish domestic growth and a strong yen that was hampering export demand. The tsunami gave them a great windfall.

The current statistical term for the Japanese Tsunami is a negative innovation component. You can go back in time and determine really bad negative events like this one or 9/11 in the US or the 1987 stock market crash in the US and then do a statistical estimate of how often these events occur and how bad they can impact the relevant market.

But, my observation is that very few negative innovation components have a dramatically bad impact on stock prices unless that stock market is overvalued relative to the growth prospects for the underlying economy. The growth prospects for Japan with a stagnant domestic economy and a strengthening Yen were very poor before the tsunami, so I would have been either short or uninvolved in Japan (I was uninvolved.)

Rebuilding the damage should give Japan a nice domestic growth push, although I think this will take longer than most expect. I'm watching the Japanese market for signs that it is investable again and will probably buy a broad-based ETF.
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