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Scientists Develop Financial Turing Test
KentuckyFC writes writes to share a new online test that is being touted as the "financial Turing test." The web-based exercise asks users to distinguish between real and randomly generated financial data. "Various economists argue that the efficiency of a market ought to be clearly evident in the returns it produces. They say that the more efficient it is, the more random its returns will be and a perfect market should be completely random. That would appear to give the lie to the widespread belief that humans are unable to tell the difference between financial market returns and, say, a sequence of coin tosses. However, there is good evidence that financial markets are not random (although they do not appear to be predictable either). Now a group of scientists have developed a financial Turing test to find out whether humans can distinguish real financial data from the same data randomly rearranged. Anybody can take the test and the results indicate that humans are actually rather good at this kind of pattern recognition."
Is the test where we have to decide whether to install Java?
Because I pass.
It means it follows a recognisable pattern, that can be distinguished from random data after the fact but not predicted in advance.
It's a chaotic system, but it has certain patterns that seem to repeat. The thing I noticed after looking at a few, is that the real ones are easily identifiable by the development of resistance and support levels, which technical traders use to find probable entry and exit points. Basically, the hypothesis is that a group X holds the stock, they tend to have some psychological barrier price in common at which they would sell, and another at which they would buy more, this selling and buying makes it difficult to break through those price points. When it approaches one of those points trading goes up, if something has changed to make the stock more attractive to another group, or to make it less attractive to the group of traders that tends to hold it, it will change hands, and the new investor group will have new barriers. So over any given time period you will notice a lot of closing stock prices at close to the same level, then a sudden jump, and new level it bounces between, etc.
It's either false dichotomies, or the terrorists win, you decide.
Slashdotters!! If you had a goddam girlfriend, you'd know what "not random and not predictable" meant.
No folly is more costly than the folly of intolerant idealism. - Winston Churchill
That's a function of supply and demand. We virile Canadian men don't need Viagra, so that drives down the price.
Support Right To Repair Legislation.
Actually you can play games with pi's digits that would be rather hard. Say I'd give you 5 consecutive digits and ask you for the position in pi. Since there are infinite solutions to this question, it's not actually predictable (chance of guessing correct would approach 0 rather fast). Or I could give you 5 digits from pi (or any other number) and ask you to give the next number in the sequence. Again, this next number is totally not random, but not predictable in any way either.
Not random, not predictable. Lots of questions about pi are like that.
But this is not what is indicated in markets. Markets are unpredictable due to a chaotic component in their makeup : humans. Only if you were to predict the actions and thoughts of every participating human precisely over long time periods would you be able to predict markets. Presuming that the markets are influenced by real-world events, you'd also have to predict the real world. "Will Obama get reelected ?" is a question to which any serious market prediction system would have to know the answer, because it matters a lot. Same goes for "Will the football season of 2011 be more or less interesting than 2010", because these questions make a large difference.
It's like the weather. The weather (and climate for that matter (second paragraph)), in mathematical terms, consists of a very large collection of mostly random effects. Due to the fact that effects grow over time until they dissipate, but that takes time, you have some amount of predictability in the short term (although sometimes such an effect can have an extreme short-term effect. There are places in the pacific which go from sunny and calm seas to hurricane in about 20 minutes, sometimes right on top of a ship). So in the short term weather "averages out" the different effects (meaning if you see a strong cloud front anywhere, it will start dissipating. If you see any kind of clearly defined features anywhere they will get "blurred" in the short term). But in even the middle term, never mind the long term, new effects will soon dominate whatever you're seeing at any particular time (new cloud fronts, new wind directions, obstacles in the movement of air, unexpected heat sources on the ground, or just the opposite, very cold layers of water that just appear out of nowhere). Since those new effects are the result of idiotically small events (the proverbial "butterfly flap"), the only way to predict weather patterns long term is to track every last human, every last butterfly, and so on. Obviously this is not just impractical, but impossible. So you could say that to even know what the weather (or temperature, or ...) is at any given time, you'd have to be God. If you're not omniscient, you only see a small, averaged and smeared out picture of the weather, no matter how precise the instruments you're using. To predict the weather (or climate) with any reasonable amount of certainty, you'd need a simulator that could simulate the entire universe, faster than the universe works. Generally, mathematicians joke that they'd simply use such a simulator to guess tomorrow's lotto numbers and retire to a pacific island, but the point of the joke is that any program that is capable of predicting any real-life chaotic system, such as climate (or even the path of the planets, which is in the long term nowhere near as constant as they seem), has to have the ability to calculate next week's lotto numbers.
The problem is that tiny, seemingly absurdly unimportant variations today make a large difference tomorrow. Another illustration might be that wether you park your car in front of the house or behind it will generate a difference of 5 degrees celcius in the average worldwide temperature in 10 years. On the other hand huge, seemingly important things like the energy absorption rate of the ocean hardly make any difference at all (because whatever effect they have, no matter ho
Yes, you are pretty ignorant, I'm afraid. Don't be ashamed, you're in the larger group. Happily, a dose of economics would sort you out a treat. To sort out your central misunderstanding, neither the amount of wealth or the amount of things that you can buy or the amount of work there is to be done is fixed. They relate to each other in rather complex ways, but the upshot is that we can all become richer - and if you don't believe me, ask your great-great-grandfather, or a Chinese factory worker saving up her wages to pay for an education.
[FUCK BETA]