Replies to post #3723 on A.I.M. Users Bulletin Board (AIMUSERS)

[Conrad]

TooFuzzy.

This board is a chat board now. A lot of traffic. I am going to take rest, but you wrote this and will reply in shorthand:

Maybe with a lot of head scratching you will be able to simplify it so it will be as understandable as E=MC(squared)

I am sure a lot of unintelligible calculations took place before Einstein hit upon that formula!

1) As I have outlined my thoughts on formalizing the AIM mathematics, it amounts to a rather simple set of linear equations that are treated mathematically between the trading points. Between these points the mathematics are simple. This means that the functions can be differentiated or integrated(if that was desirable). I shall make up an example of what I mean.

2) You say that E=MC^2 is understandable. OK, if you simply see it as a quadratic equation I agree. What it means is profound and mysterious, even for the extend that it may not be true exactly. The works leading up to that were not unintelligible at all. The work of Lorentz and Maxwell, and many others, being faulty in some ways, was the cornerstone of this final equation. Einstein brought the bits and pieces together and added his own unique elements. It's a simple representation of what is measured, at least to within the accuracies of what can be measured.

Zzzzzzzz




Conrad

[Tim Reese]

Conrad, Toofuzzy; sounds highfalutin doesn't it...

"means-reverting log-normal variant simulated signal"

It's just a simulation of a price history generated with a series of random numbers. Most of the name describes the attributes that make the fake prices sorta kinda resemble a real price history. I've done a lot of numerical simulation, but this term is just something I picked from the literature about a model that should resemble stock prices.

Mean reversion is interesting ... it just says that markets fluctuate around some long term value. A very realistic idea actually. I expect that equities do this too, that is, that prices are only loosly coupled to value, but that prices eventually return to value like gravity. GMO has one or two interesting white papers on this, http://www.gmo.com

Toofuzzy wrote

The main thing to watch out for is anything that requires you to make a decission to modify the formula along the way because emotion will then come in to the picture. The beauty of using AIM is that it removes emotion from investing once you decide what to invest in.

I hear that, although it's hard when you are learning so much day by day not to modify the plan to accomodate new info. Plus, I think one needs to incorporate R&D into the business plan to remain competitive. The business analogy appears a very powerful concept for investors, from my (possibly) naive POV.

Got to scoot - best regards Tim