Norman Packard on Chaos

Chaos is a particular kind of random motion, one that combines both randomness and structure. The system starts somewhere in space and goes along until it falls onto an attractor. With the simplest kind of attractor, a fixed point, the system goes toward a single state and stays there. You see this with a marble in a bowl; it rattles around until it reaches the bottom of the bowl. With a periodic attractor, the system cycles through a sequence of states, like the arm of a metronome left to right and back again in a regular cycle. If you perturb it briefly, it tends to return to its set cycle. The next most complicated kind of attractor – the strange attractor – displays both structure and chaotic motion.

The intrinsic randomness of a chaotic system limits predictability. But the structure of the attractor implies that you can predict part of the time what the system will do. Chaos represents an indeterminate level of predictability between the motion of the planets, which is derivable, and something completely random, like particles in brownian motion. Chaos presents systems that are random in the long run but have just enough structure so that in the short run you can figure out what they’re going to do. The name of the game of my data analysis techniques and learning algorithms is to probe that limit. How far into the future can you predict?

Norman Packard on Stock Market State Space

A strange attractor is an object in state space just as an ashtray is an object in state space. Except that in a state space the coordinates are not like x,y,z coordinates. They depend on context. Let me give you an example. The state space of the stock market is the value of all the stocks, the money supply, foreign exchange rates, the price of treasury bonds, and so on. These are the state space variables and its coordinates. And just as you can describe the geometrical properties of this ashtray, so too can you describe the geometrical properties of a strange attractor in state space.

A strange attractor is not a force. It doesn’t have the same kind of physical reality as gravity. The state space picture of a dripping faucet shows you a certain kind of structure. The state space data for the stock market may show you the same kind of structure. These structures can be identified as manifestations of a particular kind of strange attractor. The meaning of the variables for each of these state spaces is different, but the attractor is the same. The science of chaos tries to figure out which kinds of attractors are commonly found where.

Warren Buffet on Efficent Market Hypothesis

Observing that the market was frequently efficient, they went on to conclude incorrectly that the market was always efficient. The difference between the propositions is night and day.

Dollar Cost Averaging – Apakah Efektif?

Sering mungkin investor mendengar rekomendasi pakar-pakar keuangan untuk menggunakan metode Dollar (Rupiah) Cost Averaging ( selanjutnya kita sebut DCA), dalam investasi mereka di pasar saham. Metode ini sering direkomendasikan untuk mengurangi risiko portofolio investor dari volatilitas pasar saham. Akibatnya, nilai portofolio investor lebih stabil, membuat mereka bisa tidur dengan tenteram. Continue reading

Riding Out The Volatile Market

This was an article on Jakarta Post – August 30, 2007 edition, or about a month ago, printed under a slightly different title (edited by the newspaper editor, though I like the above title better).

Riding Out The Volatile Market

The recent equity market turmoil triggered by problems in the U.S. sub-prime lending activities saddled many investors with either substantial losses or much reduced investment profits. In the midst of great market uncertainty, knowing what to do next with your equity investment portfolio can be critical to its health. Continue reading

Saham, Growth dan P/E (2)

Pernah dengar perusahaan bernama Yahoo? Tentu saja. Sebagai pengguna jasa internet, hampir pasti anda mengenal perusahaan ini. Yahoo sampai sekarang masih mendominasi bisnis internet segmen technology/internet services provider. Lalu, bagaimana dengan kinerja saham Yahoo? Pastinya bagus dong? Mungkin tidak seperti yang anda bayangkan. Kenapa bisa begitu? Masalah utamanya adalah masalah valuasi Yahoo di awal 2000 yang terlampau tinggi, akibat, antara lain, ekspektasi laju pertumbuhan laba Yahoo yang terlampau tinggi. Selain, tentunya, situasi pasar yang irasional di tahun 2000. Continue reading

Warren Buffet On Look Forward, Not Back

Of course, the investor of today doesn’t profit from yesterday’s growth.