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Stock-Picking Computers

Posted by ryuzaki0 on from the finally-useful-math dept.

eldavojohn writes "A while ago, Slashdot ran an article on Algorithms used to augment or replace analysts. Today, the NY Times is running an article on stock-picking computers with quotes from the lovable Ray Kurzweil." From the article: "'Investment firms fall over themselves advertising their latest, most esoteric systems,' said Mr. Lo of M.I.T., who was asked by a $20 billion pension fund to design a neural network. He declined after discovering the investors had no real idea how such networks work. 'There are some pretty substantial misconceptions about what these things can and cannot do,' he said. 'As with any black box, if you don't know why it works, you won't realize when it's stopped working. Even a broken watch is right twice a day.'"

2 of 218 comments (clear)

  1. Re:It's harder than it looks by $RANDOMLUSER · · Score: 3, Informative

    Found it: it was Nova: "Trillion Dollar Bet". Here's the transcript.

    --
    No folly is more costly than the folly of intolerant idealism. - Winston Churchill
  2. Re:Why? by DavidHumus · · Score: 3, Informative

    This is one of the most beloved urban legends of people who need an excuse for their poor luck.

    In fact, in the Wall St. Journal's long-running contest, the experts have out-performed the darts 29 to 21 times (ahref=http://www.webtrading.com/issue18.htmrel=ur l2html-21923http://www.webtrading.com/issue18.htm> ). This does not mean the experts are all that great - the score is 26 to 25 againsT the Dow Jones Industrial Average.

    However, in the less-long-running contest of Wall St. Journal readers versus darts, the readers are getting trounced 13 to 9 (ahref=http://online.wsj.com/article/SB11584521400 7665534-search.html?KEYWORDS=dart+picks&COLLECTION =wsjie/6monthrel=url2html-21923http://online.wsj.c om/article/SB115845214007665534-search.html?KEYWOR DS=dart+picks&COLLECTION=wsjie/6month>).

    What is true, and more damning to investment professionals, is our poor performance versus broad-based indexes, which are inexpensive investments.