Friday, February 14, 2020

Random Walk Theory of Share Price Movements Essay

Random Walk Theory of Share Price Movements - Essay Example A lot many efforts were made towards identifying a predictable trading pattern which could be used for chasing profitable deals. From the mid-1950s to the early 1980s, a random walk theory (RWT) of share prices was developed based on the past empirical evidence of randomness in share price movements. RWT basically stated that speculative price changes were independent and identically distributed, so that the past price data had no predictive power for future share price movements. RWT also stated that the distribution of price changes from transaction to transaction had finite variance. In addition, if transactions were fairly uniformly spread across time and were large in numbers, then the Central Limit Theorem suggested that the price changes would be normally distributed. Kendall (1953) calculated the first differences of twenty-two different speculative price series at weekly intervals from 486 to 2,387 terms. He concluded that the random changes from one term to the next were la rge and obfuscated any systematic effect which may be present. In fact, he stated that 'the data behaved almost like a wandering series' (random walk). Specifically, an analysis of share price movement revealed little serial correlation, with the conclusion that there was very little predictability of movements in share prices for a week ahead without extraneous information. In 1959, Roberts generated a pattern of market levels and changes akin to actual levels and changes in the Dow Jones Industrial Index. He estimated the probability of different share price movements over time by using a frequency distribution of historical changes in the weekly market index, and assumed weekly changes were independently drawn from a normal distribution with a mean of + 0.5 and a standard deviation of 5.0. He concluded that changes in security prices behaved as if they had been generated by a simple chance model .The fundamental concept behind random walk theory is that competition in perfect mar kets would remove excess economic profits, except from those parties who exercised some degree of market monopoly. This meant that a trader with specialized information about future events could profit from the monopolistic access to information, but that fundamental and technical analysts who rely on past information should not expect to have speculative gains.From the theory of random walks arose the theory of efficient markets. The Efficient Markets Hypothesis (EMH) states that current prices always 'fully reflect' available information, so that the only reason prices change between time t and time t+1 is the arrival of new information. The EMH requires that only two necessary conditions be met. First, the market must be aware of all available information .The type of information available is determined by the strength of the EMH being tested. In a Weak Form EMH, current prices entirely reflect all that can be known from the study of historical prices and trading volumes. If the Weak Form is valid, technical

Sunday, February 2, 2020

Internet for Business Assignment Personal Statement

Internet for Business Assignment - Personal Statement Example And this event has been my chance. Having had Thortons' chocolates every day of my life here in UK, I am excelled at the chocolate tasting quiz and almost guessed all the chocolates presented to us. We spend the whole Saturday morning touring the locality and taking pictures of the lush gardens and other sceneries. During the afternoon, we attended a series of interactive workshops which includes sampling the dessert gallery collection which features some of my favorites from Thorntons. The highlight of the day was the opportunity given to the guests to create their own chocolate sculptures. I personally enjoyed this part of the weekend as I was able to experiment. However, the sculpture didn't turn out the way I want it to be. The presenters also educated us about the origins of the chocolate, how cocoa beans are transformed into chocolate bars as well as the process of making some Thorntons masterpieces. Our Saturday ended with a three course private dinner as we are serenaded by classical music which dates back from the time of Mozart and Beethoven. The last day of our Chocolate Lovers Weekend commenced with a sumptuous breakfast. I am surprised as one of the hotel staff brought free chocolates into our room together with fruits to be dipped in the chocolate fountain. I have always believed in you... Subject: Thornton's Chocolate Lovers Weekend at Hilton Tewkesbury Dear Sir Mike, I have always believed in your commitment in maintaining the leadership of Thorntons in the confectionery industry. The launch of Thorntons Chocolate Weekend at Hilton Tewkesbury which you envision to add more customer value proves to be correct having experienced the fun myself last week. The activities designed for this event highlights truly highlights the company's quest in making Thorntons a part of the consumers' daily life. Acquainting our customers on how they can make their own chocolate sculptures and fountains at home gives them the chance to delight their guests and loved ones using our products. Also, the incorporation of leisure, good music, and sumptuous meals further stress and link Thorntons chocolates with relaxation and indulgence. With all these good points however, I believe that the event can still be improved by designing different activities according to each guest's preferences. Having a different set of activities per weekend will not only customize experience but will enable the company to know more about the inclination of its customers. Having a weekend for teens will also be possible noting the fact that teens' spending on confectionery is increasing rapidly. I believe that with the number of people joining the event, the Chocolate Lovers Weekend will have an impact on internet business trends especially because the primary publicity used is online advertisement. Thorntons should continue informing customers about these events through websites that they visit. Sincerely, Your Name