How we wish that we could understand capital markets. Then it would make sense to do all the things we currently are doing, like make short-term forecasts on equity markets and certain equities. However, predicting markets does not make any sense at all. Improving companies and their communication however does.
Historic development of equity prices cannot be predicted because it is truly chaotic. So many uncontrolled forces are at work and their unpredictable interactions are so complex those extremely small variations in the strength of the forces and the way they interact can produce huge differences in outcomes. Historic equity market development is what is called a “level two” chaotic system. Chaotic systems come in two forms.
Read more about the two chaotic systems at EQapital.se