Jules Augustin Frédéric Regnault was a French stock broker's assistant who first suggested a modern theory of stock price changes in Calcul des Chances et Philosophie de la Bourse (1863) and used a random walk model. He is also one of the first authors who tried to create a "stock exchange science" based on a statistical and probabilistic analysis. His hypotheses were used by Louis Bachelier, who is considered a pioneer in the study of financial mathematics. Bachelier had anticipated many of the mathematical results developed in Albert Einstein’s 1905 paper.
Somehow my Interdisciplinary mind registered Eugene faster than Fama. After all Eugene Stanley, the father of Econophysics could also get a Nobel. If Psychologists could get the biggest award for Economics, a physicist could have been there too. But then the surprise became bigger, not because it was Fama, not Stanley but because Robert Shiller shared the award.
Why is the stock market not a science? Today many elements of our life have a degree of predictability, consumption patterns, social behavior, earthquakes, etc. However, the predictive measure is lacking when it comes to stock markets. Behavioral finance highlighted this lacking measure and accountability. Even statisticians limit themselves to the prediction of stock market volatility rather than stock market direction.
Do you know how many times you use “Probably” in a day? The word refers to the possibility of a certain event happening. Irrespective of our ability to calculate the probability, we frequently estimate, compare and make decisions based on probability. It is a subjective degree of belief in the occurrence of an event. The concept of probability has philosophical, psychological and scientific interpretations. Putting simply, the probability of an event is the ratio between the number of favorable events and the number of all equally possible cases.
