Feedback in Real Life

日期:2013/12/31

If market or individual stock a has a positive predictive correlation with market b， and b had a positive predictive correlation with market a， then there is positive feedback， and an explosive growth when a is up would occur. Similarly， if there is a positive predictive correlation， i.e. the serial correlation of a with b say one day forward is 0.2， then market a goes down. If there is a negative predictive correlation of market a with market b， then when a goes up， b will tend to go down， and vice versa， and there will be a stable equilibrium between the two with each pulling the other in opposite directions.

The situation is very similar to what occurs in all feedback circuits in electronics， including what you seen in any kind of amplifiers where there is negative feedback to maintain stability.



What are the markets that have positive predictive correlation with each other， i.e. when a is up today， b tends to go up tomorrow， and when b is up today， a tends to go up tomorrow? There aren't many. And when such occurs， it is only for a limited time. So you have to be on your toes if you wish to use positive feedback. All this can be quantified with varying degrees of reality and rigor.