Thread: IQ Scores.
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Old July 25 2013, 01:44 PM   #91
Solstice
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Re: IQ Scores.

Random walk is used because the stock market results from a massive amount of interactions, some of which are quantifiable and some of which are not. Not only that, there are interactions whose mechanisms are not publicly known--think high-frequency trading algorithms, whose internals are closely-guarded secrets.

People are not robots and do not behave like robots. Many trading decisions are made on instinct and intuition rather than hard data. All you have to do is look at game theory to see how people frequently make suboptimal decisions even when the optimal decision is staring them right in the face. Kind of hard to make reliable predictive models in the face of that.
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