Algorithmic Investors on Wallstreet

eldavojohn writes "Recently, setting up prediction markets that people play was the big thing to guess the future. But is there a chance that computers will replace investors? From the article: 'Quantitative investment managers use a model to identify sets of characteristics for their investments. Computing power is now relatively cheap. Obviously, computing power can access data almost instantaneously and simultaneously. Asset classes and financial instruments within those asset classes can then be screened and investments are selected. They reflect the manager's views.'"

Comments

Market News Writing Computers Also

[eldavojohn]

More and more I see computers being used to harvest and cultivate data for market analysts and investors. Even Thomson has built software to deliver market news. From that link:

Thomson has built some computer programs at $150k-$200k a pop to deliver automated articles on US market news. The programs can publish a news story on, say, company financials, within 0.3 seconds of their release to the NYSE or NASDAQ. This is purportedly helpful to hedge traders and others of their ilk.

$150-$200k? Looks like there might be some profit in artificial intelligence afterall. Although I wonder if this would even be considered AI?

Re:Market News Writing Computers Also

[EastCoastSurfer]

Actually a lot of patterns are showing themselves in the extreme short term (think seconds here). There are so many automated trader/AI types of software exploiting already these patterns, as soon as one is found it doesn't last long since others jump in. I don't have a link handy, but I read a good article awhile back about econophysicists looking for and finding short term patterns in the market.

I also know of a company nearby doing exactly that and doing well and have an acquaintance who retired at the age 35 or so after running his companies dept. who found (using algorithms) and exploited these patterns that don't exist.

Re:Market News Writing Computers Also

[HUADPE]

No, they managed to measure the velocity, of the ball, the wheel, and the other factors involved in roulette, and then quickly and accurately compute the path the ball would take. Once you release a coin in a flip, if monitored carefully and calculated correctly, you certianly can predict how it will land.

Is it difficult? Yes. That's why it's impressive. It is not impossible though.

Nothing new here

[zero_offset]

Big deal, computer models have influenced trading for decades. And not only would it be "irresponsible" to fully automate trading (as the article states), it would also be "illegal". Computer-driven market analysis and prediction is a huge industry -- the big firms spend vast amounts of money on it. I'm not seeing what's newsworthy here, for slash or for El Reg.

Re:Nothing new here

[CastrTroy]

Yes, but if you could mostly automate it, you could do the trading a lot cheaper. Instead of paying highly qualified people hundreds of thousands of dollars per year, you could hire someone for $10 an hour to click on a sell/don't sell dialog box on a computer all day. The computer would be the one making the decisions, but the person would be giving the final order, making it not completely automated. Of course, the person would only ever click on sell, and the computer would only ever present an option which was a good idea to sell. However, the person would just be there to be the human loop in the process, and to ensure that there wasn't something extremely fishy going on with the trading.

Re:Not illegal

[zero_offset]

I suppose it's a question of semantics. Fully automated trading *is* illegal. Automated trade execution requires a person in the loop (setting thresholds for example) and is highly regulated. I actually know a lot about this, I was writing market-timing fraud detection software for a living as recently as last year.

As for the question of "Why?", the answer is on the page you linked. Black Tuesday, for example.