ARTICLE SYNOPSIS ...Changing tides in the investment software market by Thomas A. Rorro Remarkably, the investment software industry is on the threshold of a major transition. In the near future, it will no longer be economical to buy investment software. Instead you will be dialing up and renting the capability from one of the national timesharing services. Even today, we see the genesis of these changes. They are beginning slowly at first but the economics are such that the tide must sweep the marketplace. To explore the issues which surround the investment software industry, let us consider the techniques de...
ARTICLE SYNOPSIS ...part 1 Assessing risk on Wall Street A philosophy of investing by Thomas A. Rorro The goal of investing is to make a profit. To achieve this goal, the investor places his money at risk--with the hope of increasing his wealth. Whether by buying real estate, depositing funds in a savings account, or buying shares of stock, the investor wants to protect his current assets and make a profit. Investors invest with an intuitive knowledge of risk. But only the banking community has been able to quantify both the expected profit and the risk. Most banks provide a specified rate of return in a risk-fr...
ARTICLE SYNOPSIS ...Assessing risk on Wall Street part 2: Applying the Random Walk by Thomas A. Rorro The Random Walk theory lets the investor evaluate the risk of an investment before the investment is made. In the first article in this three-part series, the potential profitability of this approach was demonstrated. Investments were reduced to a graphic representation of profit vs. the underlying common stock price. In this article, we will examine a technical analysis approach to the Random Walk. Profit characteristics of basic investments The profit characteristics of market instruments are determined by t...
ARTICLE SYNOPSIS ...Assessing risk on Wall Street by Thomas A. Rorro We have discussed the Random Walk theory as a philosophy of investing and its technical implications. This final article in the series presents the framework for spreadsheet implementation of the concepts presented thus far. Any electronic spreadsheet program can be used. How can the Random Walk theory be applied to determine the worth of an investment before it is made? Three indicators are used: - Probability of a Profit (PP)--the risk to the initial capital investment; - Expected Profit (EP)--a measure of the expected rate of return; and -...