Ideosphere Forum

Re: if-discuss: too many Claims?

Author: Dave Steele
Conversation: if-discuss: too many Claims? ( prev | next ) reply!
Topic: fx-discuss ( prev | next )
Followed-Up-By: Randy Hudson's post, James Jones's post
Date: Mon Jul 22, 1996 10:03 am
James Jones
Dave Steele
James JonesRandy Hudson



>On Sat, 20 Jul 1996, Dave Steele wrote:
>
>>...I don't believe that there is an
>> accurate market unless trades are occurring.
>
>Not necessarily. No trades could simply mean that the price has been
>pegged successfully, as closely as possible to the "right" price.

Exactly. If there is no activity in the market, the price may be 'right',
or it may not. There is no assurance either way.

>As long
>as no new information enters the market, it has no reason to fluctuate and
>be traded.

Sure it does. As new traders are added to the mix, they will add their
opinion to the bid sheet. Also, as older traders re-evaluate their
portfolio (e.g. flush with cash from the election), they can be expected to
change their position, even if their opinion (and the state of the issue)
is constant. As long as the overall market is dynamic, every issue should
be expected to be affected.

>In fact, no trades actually have to occur for the price to
>change. It's sufficient for the bid and ask to change.

If bid and ask prices are changing, and the spread is small (also a
desirable trait), then trades will likely be occurring. If one of those two
traits is missing, then assumptions about an efficient market may be
suspect.


-----
Dave Steele daves@xetron.com
Xetron Corp.
460 W. Crescentville Road
Cincinnati, Ohio 45246
http://www.xetron.com/


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