Disclaimer:

Disclaimer: The blog posts and comments on this blog and posts on social networks are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is". The blog is stocks analysis and valuation, Bitcoin, Cryptocurrencies, Artificial Intelligence, AI, deep-learning focused. Independent, unbiased AI insights. Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blog posts on this blog and posts on social networks. Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blog post and posts on social networks! The blog is property of Wolfteam Ltd. www.wolfteamedge.com Respectfully yours, Petar Posledovich

Monday, December 5, 2022

The Memory of Stock Market Prices. A Tesla Valuation Application



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.





No comments: