Has anyone done this before? Is it a waste of time? Is higher math needed? Is it fairly accurate?

I'm just curious since calculus is the study of change, and I've been thinking that one could study the change in stock prices. Obviously the price would be a dependant variable of many independant variables.

I think the problem is that one of the key variables is human reaction to events throughout the world.  Emotional reaction cannot be accurately predicted.  



 

I don't know about calculus, but the books I'm reading about trading point to the human emotions of greed and fear as being consistent predictors of stock action.

Yes, people have done this.  See the wiki on James Simons http://en.wikipedia.org/wiki/James_Harris_Simons

Possibly, but there is definitely a relationship between a promised predictor of stock action and book sales, though.

Most undergraduate majors in colleges of business typically have quite a bit of calculus classes as part of the major. At my school in Utah, the economics major included Mathematics for Economists 3620, which includes:



"linear algebra, differential and integral calculus, and constrained optimization."

i have been in the top of financial advisors in the world for about 9 years...and chairborne simply hit the nail on the head...2 things run the stock market and 2 things only...you can justify p/e ratios, betas, returns, fund manager turnovers, etc...until you are blue in the face and lost all your $$$...the 2 things that run it...are FEAR and GREED...cut dry that is it...how do you make the top...manage 75 million in assets and not lose a dime...nada, zip, zilch...not one client has lost a nickel...my worst conversation i had with a client was this...i have good news and bad news...the bad news the market tanked...the good news...we still have all your $$$...the era of chasing the golden return is way past gone...(and dont give me, the old BS line that the market always comes back, history has proven it, blah blah blah, i can destroy that theory all day long)...if you can consistently get 6-8%...thats pretty damn good...

Has anyone does this before?!?

Google the term "quants".  

In short, yes...this has been done before.

really? 75 gets me in the top?

no thats just assets under management...they base the top advisors numbers based on, new clientele revenue per year...which also entails retention ratio...i can count on one had the amount of clients that have left me...total is 3, and for legit reasons...2 people moved and we found them someone local so they could have a contact in their new state, the other just wanted to have more risk...and the gentlemans age at 70yrs old...didnt need risk, i would like to see his portfolio from '07 and '08...i know where he was prior invested, so his losses should have set around 40%...i take a no risk perspective thus i have taken a much less risky approach...to be in the top 1%, your income has to be over $250k...total clientele is about 400 individuals...feel free to pm me, as i can give more insight...rather not give income/revenue/production on a public forum, lol...and that 75million is with ZERO losses...

The quants made big big bucks but NONE of their mathematical models could anticipate the emotional reaction of a major sell off.

hence why fear and greed play the majority factors

i was mocking your claim "top of financial advisors in the world..." $75 AUM is peanuts to manage. not even close to top 1,000.  

all your boasting and talk of "revenue"  makes you sound like a rookie.

Being a math wiz, is of limited use in the stock market. I think someone with a high school degree, who understands algebra and has a natural understanding of psychology would have a better chance than most people to make a profit. Also you need more than anything to be able to read charts and recognise trends and apply these trends to the current economics and world political and financial events as well as having the motivation to monitor these things, because you can be the smartest, most highly educated invester in the world and if you're lazy, your gonna loose your ass and the rest of us are gonna rake in your losses. Sorry about the long run on sentence!

stocks respond too much to fundamentals in my opinion for any type of short term trading. They don't follow technical analysis rules very well.

True, but they have caused much of this mess and they have failed before. I have tried to use math to help and the finance tools I have learned in college and all that and because I cant afford a computer wiz to set up a trading program for me and put my math formulas and a automated trading program together I just look at the balance sheets and the overall ecoonomy and guess what is going to do best and buy into that sector and the market leader with a price discount.

a seasoned 10 years in industry, lol...google 'court of the table' and then google 'top of the table'

that's right, what is suspected all along,  you mean life insurance sales, MDRT and "top of the table" stuff is indeed a prestigious recognition of top producers.  congrats on being a very good asset accumulator and selller of life products. indeed it is a worthy career, as most people are underinsured.  but, the ZERO losses statement commonly made by the life industry but not heard from the investment community reflects poorly on you.  as a "veteran" bragging production that is nowhere near "top of financial advisors in the world..." reflects a lack of humbleness and character all top trusted advisors share.  

anyway i'd rather be recognized by Barron's

keep dialing for dollars, cheers!

ahh wasnt meant to sound braggadocious which it can come off that way...sometimes people fire back with what qualifies you to do that...believe it or not its very little life production, more or less a majority of fixed and indexed annuity production, left the securities arena several years ago after having some bad tastes left in my mouth from inside info from how fund managers work, get greedy, lose focus, etc...transitioned to the fixed arena, safety, security, its protected against losses...sleep insurance really for the client, clientele is primarily people leaving the accumulation phase of saving and nesting away money in life to the now protecting of it...true, returns are going to be lower than that of the market, but the returns are consistent, and consistent without market risk is a better choice for that age bracket, as a good portion of the people in that age bracket cant afford another hiccup or correction in the market...been fun debating, gotta love that, different theories and interesting points and topics...no harm no foul...keeps you on your toes, LOL...an interesting read that i enjoyed is The Trouble With Mutual Funds from Richard Rutner...i think that was the final deciding straw for me to part ways with the securities side...hadnt looked back since and hadnt regretted it one bit...best wishes

Well sure, most salesmen down at the Annuity Hut have an insiders knowledge of the nefarious dealings of fund managers.  Good idea sticking with an honorable line of work like advising old ladies with regard to their equity-indexed annuity "needs."  

Regarding the original question, a working knowledge of calculus may or may not help you with your investing.  Over time you'll find that there is no holy grail miracle solution, but you might find something that gives you an edge.  From that point forward, familiarity with probability will serve you better than calculus.  As a trader, regardless of approach, you will have losses.  How you manage those losses will spell the difference between success and being resigned to a life of annuities and CD's.  Rational position sizing based on your exit strategy will become the most important thing you do.  Good luck.

i LoL'd.

ar-jedi