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A proposal

Posted: May 5th, 2019, 4:01 pm
by MarkBrezina
Dear clever minds at Wilmotts.

I have a question, on whether the following has already been done or whether you could imagine it done?

So the idea goes as follows.
I thought about stocks on the different markets and had the following idea. What if someone were to make a field equation for the stocks on any given market to show the pricing in regards to market movements, and interferences. Say one stock is in the medical industry and the US government just got a policy through regarding taxation on all drugs produced in the states. The taxation and costs of drugs would be 0%, which would make the stock rise in value.

To map that out on the market I thought of producing a field equation or mathematical map to show the spike in the area of the market regarding medical company stocks.

Has this been done before or is it perhaps a nice idea?
See picture

Re: A proposal

Posted: May 5th, 2019, 7:49 pm
by Alan
There are quite a few existent market visualization tools: "heat maps, etc"

Image

Re: A proposal

Posted: May 5th, 2019, 8:44 pm
by MarkBrezina
It's very nice to know that the idea has been done already, I think it means I'm not bouncing too far off the right path for where this field is going. Thank you very much 

Re: A proposal

Posted: July 8th, 2019, 9:18 pm
by CarlosR
I think that you are not only on the right path, but also that you are helping us to improve others. You can go to the United Kingdom or Scotland to get some better ideas

Re: A proposal

Posted: July 9th, 2019, 9:38 pm
by tagoma
I think that you are not only on the right path, but also that you are helping us to improve others.
Maybe you can share your arguments with us?

EDIT: Something went wrong. My message above was in reply to another post in another thread. Please discard my message (I cannot delete it).

Re: A proposal

Posted: July 10th, 2019, 4:30 pm
by DavidJN
What you seek seems to be a model that connects the "real" economy including fiscal and taxation policies with the financial economy. 

As far as I am aware, no one has achieved anywhere near such an integrated view. DSGE (distributed stochastic general equilibrium) macro models as used by central banks and economic forecasters tend to have laughably simple financial connections in them (often just plug financial variables that assume perfect competition), and indeed many macro economic models do not even admit the possibility of a financially induced recession.

Noah Smith, who among other things writes for Bloomberg, has a good deck on the low power of macro modeling on the web.

Good luck, dear sir. 

Re: A proposal

Posted: July 10th, 2019, 4:41 pm
by DavidJN
And at the risk of moving into something of a rant, despite a very unimpressive track record of macroeconomics in forecasting pretty much anything, regulators are increasingly requiring financial firms to include forecasts of macroeconomic variables in their assessment of capital adequacy (e.g. CCAR requires inclusion of 20+ forecast macroeconomic variables). Looks like the regulators are expecting the investment banks to solve a modelling problem that has eluded central banks and academic economists for decades. Good luck with that.

Interestingly, one of the main reasons for the development of the derivatives markets in the first instance was the desire to transfer risk because of...wait for it...the poor performance of economic forecasting.