Using Math to Spot Stock Bubbles | Science News | Scoop.it

A statistician and business professor have developed a mathematical formula that can spot bubbles in the stock market by comparing changes in a company's stock value over time. The formula relies on Brownian motion, a natural process involving the erratic, random movement of small particles suspended in gas or liquid which has been widely used in mathematical finance. When stock prices move without a clear relationship to past changes in value, it may indicate the presence of a bubble.

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