Analysis of Financial Article Essay Example | Topics and Well Written Essays - 1000 words

Analysis of Financial Article - Essay Example The author believes that in all cases, fractal structures and non-periodic cycles were found, which accordingly suggests and provides evidence that capital markets have a non-linear system, which thus makes the EMH doubtful. The author begins the article by asserting that logarithms will be applied to analyze data instead of percentages as logarithms can calculate cumulative returns and percentages cannot. Thus, the steps to analyzing R/S for capital markets include first converting prices into logarithms and then applying the suggested equations. Then each capital market instrument and data is analyzed turn by turn to gauge volatility, cycles, and price changes. The author uses Hurst statistics to analyze various capital market instruments and implies at the end of the article that prices are reflections of investors’ concept of ‘fair value†. While some may believe this to be a single value, this can actually be a range of values which is based on information such as the earnings from an investment, the management system, the new products offered, and the economic environment in that area. After fundamental analysis and technical analysis of what other investors believe their counterparts are willing to pay, the price is automatically adjusted to what is perceived as fair price and thus other investors become attracted to the investment and begin to purchase it. A Hurst statistic of more than 0.5 suggests that new information and previous events may affect the future prices of securities while one, which is lower than 0.5 implies the opposite. The author claims that the capital markets have a fractal nature and thus models such as the CAPM, APT, and Black-Scholes model fail. It is mainly due to their simple assumptions and their lack of acknowledging the importance of time when making vital decisions. Hence, the author believes that fractal analysis is a better measure of the reality of capital markets and the outcomes of human decision maki ng. Fractal analysis is a reflection of the reality of life and how messy and complicated results can be. Thus, while it makes mathematics more difficult, it also explains the qualitative aspects of decision making and capital markets. It also gives capital markets a number of air values, cycles, trends, and recognizes the fact that there are innumerous possibilities. Thus, in the author’s point of view, fractal analysis is a better measure of the capital markets rather than the simple models as it accounts for a number of things, which are not accounted for in simple analysis. Hence, even though it is more complicated, the author encourages its use. The important points in the article are as follows: Logarithm returns are a better measure than percentages when calculating changes in price The author suggests that enough data is collected when the natural period of the system is visible and several cycles are available for analysis The first regression analysis is applied to the S&P 500 from 1950 to July 1958 The high value of H suggests the fractal position of the market The stock market results are not in accordance with the efficient market hypothesis The author suggests that market returns are persistent and have a fractal probability distribution The system is non-periodic and reinforces trends According to CAPM, a higher beta stock value is riskier than a lower beta stock value This is due to higher volatility The author suggests that high H values pose less risk and low H values may pose more risk High H values have less noise in the data while lower H values have more noise High H values may change abruptly Portfolio diversification reduces risk Market efficiency can be determined by the level of noise in the

Analog and Digital Formats Essay Example | Topics and Well Written Essays - 500 words

Analog and Digital Formats - Essay Example Smith asserts that : . flexibility is one of the chief assets of digital information.   The bits of data can be recombined for easy manipulation and compressed for storage. Digital images will not degrade when copied as analog formats degenerate. Information in digital formats can over access and can be downloaded millions of times. The process of converting analog to digital format is known as â€Å"digitization†. It is also important to note that digital format is best used with electronic communication such as PCs, Ipods , DVD players, and other electronic equipment. The main function of digital recording is the conversion of the analog wave into a stream of numbers and records the numbers instead of a wave. Usually, a device known as analog-to-digital converter (ADC) does the conversion. However, a multimedia PC can also perform the conversion by using audio editing software. There are many formats that you can choose from such as Windows WAVE (.wav)  ,QuickTime Movies (.mov), RealAudio (.ra, .ram, .rp),MPEG Audio (.mpg) Moving Picture Experts Group MIDI (mid) Muscial Instrument Digital Interface, and Windows Media Audio (.wma). The choice of format determines delivery speeds, quality of sound, plug-ins required and size of the audio file. The quality of sound is affected by the sampling rate especially in analog-to-digital conversion. Certain distortions such as noise can happen if the sampling rate is not achieved. The website pctechguide suggests that ideal sampling rate in audio recording for personal use is 44.1 kHz .Due to the different formats available, some players cannot recognize the format, thus, programs like â€Å"codec’ can make this possible. There are many types of codec such as divx codec, avi codec, MPEG-Layer 3 codec depending on the user’s needs and preference. An important factor in converting analog to digital formats is compression. Compression enables your files to download quickly. Compression