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Stock Analysis

Chaotic Markets

Is it useful or even relevant to predict stock market movements? The answer depends on what kind of investor you are. If you are a long term investor( > 5 yrs), the short term stock market hick ups (even crashes) are irrelevant. The main question there, is what kind of risk measures will help your portfolio  yield returns that beat the stock market returns. (see New Risk Measure). On the other hand short term predictions (at least probabilistically), may be of interest to short time investors such as option investors.

Our analysis shows that, when markets are mild to moderate chaotic, or non-extensive( see Non-extensive statistics and Research ),  it might be possible to predict probability of market returns for short periods such as a month or less.   This however, is not the case for strong non-extensivity like the one seen during the .com bubble and 2007-2008 crash. However in such cases the behavior of the parameters discussed above , might indicate the possibility of phase  transition such as crash.  



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