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Thursday
Apr222010

The Fallacy of Vividness in a Levy Flight News Cluster $SHW

DateThursday, April 22, 2010 at 11:17AM | by AuthorMichael Bigger | CommentPost a Comment

Written by Michael Bigger. Follow me on Twitter.

 

As the stock price of the Sherwin-Williams Company (SHW) reaches all-time highs, it is interesting to look back at how the stock reacted when Rhode Island dropped its lead paint lawsuit on the company in 2006 (see the chart below). We believe the "fallacy of vividness in a Levy flight news cluster" is the model that represents this situation.

A trader who has the ability to view similar situations in their proper contexts can create algorithms to take advantage of the deer caught in the headlights. 

 

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