Stochastic Models and Processes · 06. May 2023

Navigating the stock market is like playing a game where your pieces can shift between categories like "Tech" and "Energy." But, there's a twist! When stocks move into the "Consumer Goods" category, they tend to stay there, much like landing in a cozy inn in a board game where you're inclined to settle. This behavior is explained by the "absorbing Markov chain," a model highlighting the probability of such transitions. It's a useful tool to predict where stocks might settle in the long run.