No Random Walking!

... and...

Happy New Year! 

A video lecture on stochastic differential equations (SDE):

Link to A Tutorial Introduction to Stochastic Differential Equations: Continuous-time Gaussian Markov Processes

SDE can be used to model and simulate financial markets.

The same site (vieolecture.net) contains a lot of lecture videos on machine learning (ML). Amazing stuff.

Latest "hit" song on the net on stock speculation ...

http://www.fanfangu.com/mp3/10.mp3

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????? , ?????, ...

The company hasn't had any hit game title in many years, yet it is making a lot of money. The chart is great! At $39 a share and with a P/E around 15, I don't see much downside. The only big risk may come from potential government regulations and inside selling (after all the price is close to its historical high and the Chen family owns a lot of shares).

I would add this also: any stock that closes today higher than two days ago is a buy candidate. They would have more than recovered from yesterday's onslaught in the market while the market hasn't.

A lot of oil stocks are just doing that. Check XLE.

That's why I always love the market tumble like yesterday's. It allowes us to "stress test the tires"!

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On the A share market, ZTE?????) is showing strength lately. Could it be because it has won the first AVS-based IPTV contract in China?

Disclaimer: I do make a lot of mistakes, even on those "sure things". Trade at your own risk.

... on Fed let-down and continuing subprime worries. Yet many stocks are holding up very well, for now at least. 

It's always very hard to tell when the market is about to start trending up, but there seem to be enough evidences that the Chinese markets is doing just that.

I think that, relatively speaking, it's easier to predict the direction of a liquidity-driven and not-yet-sophisticated market such as China's. 

In a blog I posted last year, I commented with historical data showing that the volatility of the Chinese market was lower than US's. That statement seems still true today.

Beautiful chart! Behind the strength is the unrelenting demand in the developing nations. A weakening dollar helps too.

Based on available data (A) and given no major surprises (B), the chance for Sohu to underperform the market in the near future (C) is almost a certainty:

Prob{C | (A,B)} = 1^- 

Examples of B includes events like being taken-over, sudden RMB re-evaluation, or anything that is unknown or unpredictable that could make Sohu surge.

Since Prob{B} is small, then Prob{C|A} =1^-., i.e., a sure thing.