House of Paine

can any one out model the lady eve ???

here's a sample of what's trying to 


watch mistah... ANDY LO 

-------------

the following is a mere sliver of eve's grander design

besides her programs and sims
are not projects for future
develpoment

they are already up and running ...


too bad the press can't understand 

ah cassandra  


=============================



"Efficient markets and behavioral economics
can coexist in the same universe where markets
, and the behavior of their participants, evolve.

 A new approach, which I call
 the "adaptive-markets hypothesis,"
 describes just such a framework. 


Based on well-known principles
 of evolutionary biology
competition, mutation, reproduction, and natural selection




The adaptive-markets hypothesis 
begins with the premise 
that individual behavior 
is a collection of rules of thumb,
 or heuristics, produced through 
a process of natural selection.


 As in nature,
 investors learn to behave
 in ways that are conducive to survival

. If the environment remains stable
 for long periods,
 we'll end up with heuristics
 that are appropriate for that environment.
 If the environment shifts,
 certain heuristics may no longer be helpful.

 those who adapt to the new environment
 by developing a better set of heuristics
 will prosper and be more likely to pass on 
those adaptions to subsequent generations.


 For example,
value investors have developed a heuristic
 that involves purchasing stocks
 when market prices 
are below their intrinsic values,
 and, over time, 
this approach has been successful. 

However, when the environment changes, 
as it did in the U.S. stock market
 between 1992 and 2000,
 existing heuristics may be
 ill suited to the new environment.

 In such cases, we may observe behavioral biases,
 actions that seem irrational.

 For instance,
 the fabled value investor Julian Robertson 
experienced enormous losses 
during the late 1990s 
and, as a result,
 closed his hedge fund in March 2000.

 In retrospect, we know 
that Robertson's heuristics
 would have been extraordinarily successful
 had he persisted with them 
for just a few month longer,
 when the market environment
 swung from growth to value once again.


Under the adaptive-markets hypothesis,
 behavioral biases abound.

 The origins of such biases are,
 in many cases, heuristics 
that have been carried over
 from nonfinancial contexts. 
For example, certain forms of "irrational"
 risk-taking behavior,
 such as the tendency to take
 bigger risks during a losing streak
, may have actually given
 our hunter-gatherer ancestors 
advantages in the wild 
but serve people poorly in financial markets today.

 The richness of market dynamics 
comes form the interactions of people 
with different heuristics,
 in much the same way
 that the richness of the amazon rainforest
 is created by the interactions of different species, 
each with its own adaptive strengths and weaknesses. 

After the U.S. stock market crash of 1929, 
for instance, most U.S. investors
 bercame highly risk averse, 
thereby decreasing the supply of capital
 to the stock market 
and yielding a higher equity-risk premium.

 By contrast, the current population
 of investors in the stock market
 consists of a large proportion 
of younger and apparently more risk-tolerant individuals
 who developed their heuristics 
during a period of great economic prosperity

. Not surprisingly, 
when measured over the past few years,
 the equity-risk premium has declined.
 Are current investors irrational,
 or were the investors around the time 
of the great Depression irrational? 

The answer is neither.
 Preferences are shaped 
by the forces of natural selection
 operating in a given economic environment,
 so we shouldn't expect 
the investors of the 1930s 
to behave like the investors of the 1990s.


In the realm of adaptive markets,
 "rational" and "biased" 
become less meaningful qualities 
than "fit" and "adaptable."

 Instead of competing 
for food, water, and mates,
 market participants compete for wealth,
 and the selection of the most successful
 bgusinesses reinforces heuristics
 that produce wealth.

 The extraordinary competitiveness
 of global financial markets
 and the outsize rewards 
that go to the fittest players 
suggest that Darwinian selection 
is at work in determining 
the profile of the successful investor.

 After all, unsuccessful market participants-
-the ones who continue to make maladaptive decisions-
-are eventually eliminated form the population.
 In the dog-eat-dog world
 of the adaptive-markets hypothesis, 
it's survival of the richest."