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PR Newswire
03-10-2023, 09:17 AM
The stock market is a place where people buy and sell pieces of paper representing part ownership of businesses.
As such there are 2 main ways to engage with the stock market
There are many statistics techniques used in the former to help gauge market sentiments. You are trying to assess human behaviour using statistics. Whether you can make money from such analysis will depend on whether you think human behaviour can be so easily predicted.
If you invest following the latter, you can use statistical techniques to help summarized what happened in the past. But I am not sure how much it will help as your focus is trying to see how the business will perform in 10 years or more.
If it was so simple to use quantitative techniques to invest in the stock market, lots of statisticians would be millionaires.
I have a strong quantitative background and as such I very comfortable with using statistical techniques for my fundamental analysis. I set up standard template to give me a picture of what has happened. But I treat these as one of the many inputs.
The moral of the story? Investing is about gauging what will happen in the future. Statistical technique is only one of the many inputs. Have a process for these to be computed easily so that you don’t spend time collating or processing them. Rather focus on interpreting them in the context of other qualitative info.
As such there are 2 main ways to engage with the stock market
- Buy and sell pieces of paper. Here you focus on market sentiments as the driver of price changes. You generally use price and transaction volume data as proxies of market sentiments.
- Buy and sell part ownership of businesses. Here you buy if the market price is less than your estimate of the fundamental value of the company. Your focus is on the business prospects
There are many statistics techniques used in the former to help gauge market sentiments. You are trying to assess human behaviour using statistics. Whether you can make money from such analysis will depend on whether you think human behaviour can be so easily predicted.
If you invest following the latter, you can use statistical techniques to help summarized what happened in the past. But I am not sure how much it will help as your focus is trying to see how the business will perform in 10 years or more.
If it was so simple to use quantitative techniques to invest in the stock market, lots of statisticians would be millionaires.
I have a strong quantitative background and as such I very comfortable with using statistical techniques for my fundamental analysis. I set up standard template to give me a picture of what has happened. But I treat these as one of the many inputs.
The moral of the story? Investing is about gauging what will happen in the future. Statistical technique is only one of the many inputs. Have a process for these to be computed easily so that you don’t spend time collating or processing them. Rather focus on interpreting them in the context of other qualitative info.