February 16, 2005

Chaos Investing

Russ Nelson is unhappy with historical economics, or using past data to make predictions of future stock price moves. I'm 90% of the way with him but I do have a 10% caveat. Stock prices, as part of a complex system, are chaotic, in the sense of Chaos theory. In that sense, finding whether there are attractors or strange attractors should be able to increase your profit potential based on past data analysis. The patterns won't entirely hold but even small increases in predictability can lead to large increases in profit. Chaotic patterns don't hold, but they almost do, and almost may well be good enough to increase profitability over strict fundamentals investing.

Posted by TMLutas at February 16, 2005 02:59 AM