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Creators/Authors contains: "Frank, Steven_A"

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  1. Abstract Organisms gain by anticipating future changes in the environment. Those environmental changes often follow stochastic trends. The steeper the slope of the trend, the more likely the trend’s momentum carries the future trend in the same direction. This article presents a simple biological circuit that measures the momentum, providing a prediction about future trend. The circuit calculates the momentum by the difference between a short-term and a long-term exponential moving average. The time lengths of the two moving averages can be adjusted by changing the decay rates of state variables. Different time lengths for those averages trade off between errors caused by noise and errors caused by lags in predicting a change in the direction of the trend. Prior studies have emphasized circuits that make similar calculations about trends. However, those prior studies embedded their analyses in the details of particular applications, obscuring the simple generality and wide applicability of the approach. The model here contributes to the topic by clarifying the great simplicity and generality of anticipation for stochastic trends. This article also notes that, in financial analysis, the difference between moving averages is widely used to predict future trends in asset prices. The financial measure is called the moving average convergence–divergence indicator. Connecting the biological problem to financial analysis opens the way for future studies in biology to exploit the variety of highly developed trend models in finance. 
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