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Lying at the heart of the most common market theory - the efficient-market hypothesis - is the assumption that financial returns, including stock prices, are independent of one another. The mathematical signature of this assumption is what statisticians call the IID assumption, where stock price changes are independent of each other and drawn from identical distributions. Under these assumptions, stock price changes are randomly or log-normally distributed. Better mathematical models of the financial systems are needed as well to give the early warning of economic storms. Too much is at stake to avoid the challenge.
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