Stock Market Integration & Disaster

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SUMMARY

The discussion centers on the integration of stock market graphs, specifically the analysis of the Dow Jones Industrial Average (DJIA) and its historical peaks, including the 1929 crash. Participants emphasize the significance of calculating derivatives to determine the rate of growth at specific points in time, which provides meaningful insights into market behavior. The conversation highlights the unpredictability of stock market trends based on varying time intervals for measurement, advocating for a focus on longer periods for more reliable analysis. Ultimately, the discussion concludes that upward trends in stock indices are typical in economies with positive GDP growth.

PREREQUISITES
  • Understanding of stock market indices, specifically the Dow Jones Industrial Average (DJIA)
  • Knowledge of calculus, particularly derivatives and integrals
  • Familiarity with economic indicators, such as GDP growth
  • Ability to analyze time series data
NEXT STEPS
  • Research the implications of stock market derivatives in financial analysis
  • Study historical stock market trends and their correlation with economic indicators
  • Learn about time series analysis techniques for financial data
  • Explore the impact of short-term vs. long-term market predictions
USEFUL FOR

Investors, financial analysts, economists, and anyone interested in understanding stock market dynamics and historical trends.

Vodkacannon
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If you integrated the seemingly random "curve" of a stock graph (http://www.stockpickssystem.com/wp-.../1929-stock-market-crash-stock-chart-djia.gif), what physical value would you get out of it or does this not make any sense?

On the contrary, if you took the derivative at a certain point of time you could find the rate of growth at that time. This IS a value that makes physical sense.

I'm inferring that the y-axis is the index and the x-axis is the date.

On the graph, just after the peak in 1929, the stock market crashed in the greatest financial disaster ever; the great depression. Guess what, today, the Dow Jones just hit its highest index in recorded history. Should that scare us somewhat?
 
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Vodkacannon said:
If you integrated the seemingly random "curve" of a stock graph (http://www.stockpickssystem.com/wp-.../1929-stock-market-crash-stock-chart-djia.gif), what physical value would you get out of it or does this not make any sense?

This quantity has no particularly significant meaning (it would appear as a term in an average yield calculation I suppose).

Vodkacannon said:
On the contrary, if you took the derivative at a certain point of time you could find the rate of growth at that time. This IS a value that makes physical sense.

Except that this value varies unpredicatbly depending on the time period over which you measure the change. What period are you going to use - a second, an hour, a day, a month?

Vodkacannon said:
On the graph, just after the peak in 1929, the stock market crashed in the greatest financial disaster ever; the great depression. Guess what, today, the Dow Jones just hit its highest index in recorded history. Should that scare us somewhat?

No. For various reasons, stock market indices in a country with positive GDP growth will trend upwards. An index which is trending upwards will in general "hit its highest value in recorded history" quite often. If your team is leading by a record margin of 10-0 does that make the other team more likely to score?
 
Thank you for your insight.
Except that this value varies unpredicatbly depending on the time period over which you measure the change. What period are you going to use - a second, an hour, a day, a month?
Use all of them, analyze all of them. I think that the smaller the time interval, the more unpredictable and chaotic the predictions become. The monthly and yearly graphs may be more reliable.