Hey all.I lately had a discussion with a colleague about wheter one could say that the current stock price is the best predictor for future stock prices. Now I am not sure if I could argue that this is true from a theoretical point of view. If I accept random walk, then I could argue that the price containing most of the information is the actual one. Could I then infer that it is also the best predictor for future movements, or is this violated by the assumption of stochastic behaviour?Would there be any other theory stating that the best predictor for future stock prices is the actual one?Thank you very much for your help and best regards

Wouldn't future price does a better job than spot price?

Think about this idealized situation; there is a company-specific event in the future, after which the price will either go to zero, or to a fixed value, e.g. 10. Probability of each is 50%, so the current price is around 5. What does it predict?

QuoteOriginally posted by: xsquareWould there be any other theory stating that the best predictor for future stock prices is the actual one?Martingale stuff?

QuoteOriginally posted by: EBalThink about this idealized situation; there is a company-specific event in the future, after which the price will either go to zero, or to a fixed value, e.g. 10. Probability of each is 50%, so the current price is around 5. What does it predict?in such an instance, there seems to be evidence that insiders trade options and option prices contain information

QuoteOriginally posted by: ppauperQuoteOriginally posted by: EBalThink about this idealized situation; there is a company-specific event in the future, after which the price will either go to zero, or to a fixed value, e.g. 10. Probability of each is 50%, so the current price is around 5. What does it predict?in such an instance, there seems to be evidence that insiders trade options and option prices contain informationYou mean like this?Or like this?In the second case, there was indication about the direction, but little about actual future price.

QuoteOriginally posted by: EBalQuoteOriginally posted by: ppauperQuoteOriginally posted by: EBalThink about this idealized situation; there is a company-specific event in the future, after which the price will either go to zero, or to a fixed value, e.g. 10. Probability of each is 50%, so the current price is around 5. What does it predict?in such an instance, there seems to be evidence that insiders trade options and option prices contain informationYou mean like this?Or like this?In the second case, there was indication about the direction, but little about actual future price.more like thishttp://wpweb2.tepper.cmu.edu/wfa2013/wfasecure/upload/2013_PA_996887_778513_544746.pdfwhich was a scholarly article