Multiple the series by (-1)^n giving us oscillations. This would represent volatility in that occurs in actual markets.<\/li><\/ol>\n\n\n\nAn example #2 would be:<\/p>\n\n\n\n
Year 1: +$0.50<\/p>\n\n\n\n
Year 2: $-0.25 + $0.33<\/p>\n\n\n\n
Year 3: +$.125 – $0.11 + $0.25<\/p>\n\n\n\n
Etc, etc.<\/p>\n\n\n\n
Another interesting question would be what if the investments were sporadic. This could be model explicitly to have the stocks only bought in prime<\/em> year investing 1\/prime<\/em> dollars per stock (i.e. 2, 3, 5, 7, 11 for a $1\/2, $1\/3, $1\/5, $1\/7, $11, respectively). You even theoretically add the cherry on top and have force model include oscillating too. This heuristic would be the most accurate yet the most hard to calculate \u2013 way out of the scope of this blog.<\/p>\n\n\n\nIf you read this far, I congratulate you. If you read this far and understood what was said, give yourself a pat on the back and a round of applause at same exact time (it\u2019s impossible to do that) for being a diligent reader. I will post a part III if I can provide a closed form solution to the equation at the top of this page, or present more economic relevance of the model.<\/p>\n\n\n\n
~Ben<\/p>\n","protected":false},"excerpt":{"rendered":"
*This is just a continuation of the first blogpost titled \u201cModeling a Risk-Averse Investor in the Stock Market Pt. 2\u201d. * Finding an Upper Bound for our Heuristic: To approximate the upper bound, let\u2019s take J –> \u221e and not include the investment# 1 case as it is a special case then we have: Above, we shifted the index of r by 1. It now has to have an initial value of r = 2 insuring the first-rate equals \u00bd. We can make another table to intuitively understand what this represents: ROI based upon the period we invested in Continue reading Modeling a Risk-Averse Investor in the Stock Market Pt. 2:<\/span>→<\/span><\/a><\/p>\n","protected":false},"author":639,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[36,874,873,875,871,756,142,872,261],"class_list":["post-5538","post","type-post","status-publish","format-standard","hentry","category-economics","tag-behavioral-economics","tag-estimation","tag-heuristic","tag-investment-behavior","tag-model","tag-modeling","tag-risk","tag-stock","tag-stock-market"],"_links":{"self":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/5538","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/users\/639"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/comments?post=5538"}],"version-history":[{"count":6,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/5538\/revisions"}],"predecessor-version":[{"id":5563,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/5538\/revisions\/5563"}],"wp:attachment":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/media?parent=5538"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/categories?post=5538"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/tags?post=5538"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
![\"\"](\"https:\/\/blogs.pugetsound.edu\/econ\/files\/2022\/04\/CodeCogsEqn-7-1.gif\")
<\/a><\/figure>\n\n\n\n