Numerous studies have shown that day to day stock market prices have a memory of one day.
Or they are a so called martingale. A mathematical notion.
But many financial market participants study intently the past, believing there is some long-term causal relationship.
Actually, I think there is a bit of both. When there is no great event, like an economic catastrophe, war or large scale money creation by the Federal Reserve, markets do tend, nonlinearly to exhibit some memory longer than a day.
But when a structural break comes, then the inter temporal price relationship falls apart and there are jumps.
Example. When Elon Musk turned his attention almost entirely to acquiring Twitter Inc, it was quite logical that the fact that Elon now pays less attention to Tesla could lead to underperformance of Tesla's stock price. An easy comparison between Tesla's stock price and the general market easily shows there is genuine case for the above.
I estimate Tesla's intrinsic value is only 120 billion USD, mainly comprised by the electric vehicle production technology and Tesla's staff.
However, if Tesla achieves a scientific breakthrough and starts producing electric cars with a high profit margin, Tesla's value could well surpass 1 trillion USD. The proverbial structure break or jump process or quantum leap.
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