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By Bruno COLMANT, Ph.D., CFA, Member of the Royal Academy of Belgium
The financial market constantly gauges the uncertainty associated with the future, hence its inductive and eminently speculative character. The stock market is limited to a transitive role between buyers and sellers. But if the sequence of price setting is elementary, it leads to the impossibility of modeling its formation.
No equation, no matter how sophisticated, would be able to reproduce, with any predictive value, the evolution of prices. The reason is simple: the price results from contrary expectations and, therefore, postulates about future valuations. At best, and on a temporal scale, the stock market expresses values in a fleeting space. In an imaginary way, one...
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