Slashdot Mirror
Quant AI Picks Stocks Better Than Humans
Mr_Blank writes with this excerpt from an article at MIT's Technology Review:
"The ability to predict the stock market is, as any Wall Street quantitative trader (or quant) will tell you, a license to print money. So it should be of no small interest to anyone who likes money that a new system that works in a radically different way than previous automated trading schemes appears to be able to beat Wall Street's best quantitative mutual funds at their own game. It's called the Arizona Financial Text system, or AZFinText, and it works by ingesting large quantities of financial news stories (in initial tests, from Yahoo Finance) along with minute-by-minute stock price data, and then using the former to figure out how to predict the latter. Then it buys, or shorts, every stock it believes will move more than 1% of its current price in the next 20 minutes — and it never holds a stock for longer."
It's been said before, and I'll say it again. You should ban anyone buying a stock and then selling it within timeframe x (where is 1 week/6 months/1 year). Anything to cut down on the insane bullshit.
and it never holds a stock for longer
So this is really an automated gambling system rather than a tool for investment.
I am becoming gerund, destroyer of verbs.
Based on the words in your post: "Nothing" "wrong" "possibly" I am going to short 835710 shares of KAN and DELA stocks.
meep
This type of day-trading provides absolutely no value to the economy and should be regulated to death. Also, I have a hard time believing it would work in the long term, as the news is a lagging indicator 90+% of the time. It might work for shorting in that respect... but even that would be too late and high risk.
All these quant systems seem to do is increase volatility at the expense of the market establishing a general direction.
I'm all for an IRS withholding of 1% on sales of assets held less than a week, and I am a fairly active trader.
Ars Technica wrote an interesting article about this almost a year ago. What is happening now isn't anything all that new. As several people have already mentioned, yes this is dangerous because these tools trade in extremely large sums. Slashdot even covered United Airlines stock dropping from $12 to $3 when the news crawler for one of these tools thought an old story was new and the tool proceeded to dump its entire United holdings causing a massive sell off by other investors. http://arstechnica.com/tech-policy/news/2009/07/-it-sounds-like-something.ars http://tech.slashdot.org/tech/08/09/10/203233.shtml
You know what a long term investment is ? a short term investment that failed...
It takes 40+ muscles to frown, but only four to extend your arm and bitchslap the motherfucker
There is an alternatively and it just might address the capital gains issue. We tax capital gains at the same rate no matter how long you keep the investment. Why not have a sliding scale that bases the capital gains tax rate on how long you hold on to the stock. Suggested tax rates. At the same time, investors are always crying that capital rates are too high. With this scheme, they would be in control of what rate their investments would be taxed at.
1 second ... 99% ... 95% ... 90% ... 75% ... 50% ... 35% ... 20% ... 10%
1 minute
1 hour
1 day
1 week
1 month
1 year
5+ years
You could even put the tax rates on a continuous scale that negates any advantage to holding on to an investment just long enough to meet a benchmark. Yes, short term investments would be taxed at a confiscatory rate, but that is the general idea. We want to slow down the rate of trading. At the same time, investors are always crying that the capital gains rate is too high. This would put them in control of what tax rate their investments is taxed at. All they need to do is to hold on to investments long enough. This scheme would also favor the little guy who probably holds on to investments for a longer time.
Without them we'd see most of the wealth of this country flow up to a select few.
This happened long ago. Anybody remember Mr. Gates or any other CEO and Golden Parachutes and Bail Outs and Bonusess. Most of the wealth of this country is already in the hands of the few.
http://www.robschumaker.com/publications/IEEE%20Computer%20-%20A%20Discrete%20Stock%20Price%20Prediction%20Engine%20Based%20on%20Financial%20News.pdf
Standard Oil, Triangle Shirtwaist Fire, Pullman Strike, and the Pinkerton Militia. Now shut the fuck up and crawl back into your cave of voluntary ignorance while the people that didn't get a D in US History talk about how not to avoid our past mistakes rather than desperately try to repeat them as though 100 hour child-labour using workweeks where you were locked inside a building with no windows or fire suppression systems are something to idealise.
Go jerk off to some pictures of Ayn Rand or something.
A bullet may have your name on it but splash damage is addressed "To whom it may concern."
No, the wealth would spread around to anyone who was willing to take a risk and was successful.
And who is it who has the excess resources necessary to take a risk? Oh yeah, the rich. If they risk a lot of money, and lose it, they can fall back on their reserves and try again next year. The rest of us can't afford to risk very much, since failure would cost us our livelihood. That's why the rich tend to get richer, and the poor tend to stay poor.
I don't care if it's 90,000 hectares. That lake was not my doing.
There are HFs using this strategy now using dedicated reuters feeds and trading in microseconds. This means new information is impounded into stock prices well within a second. In the article they used yahoo news and minute by minute stock data? That's laughable. I suspect the reason for their returns is that they they are indexing the time information arrived, and the price you could trade at that instant incorrectly. In other words the information arrived at t + 5 seconds, and they execute the trade at the quotes available at time t. Also I suppose they are not including margin and transaction costs, reasonable slippage, and risk-adjusting their returns?
Nah, look at the successful people in history, and see that almost all of them got helped off to a great start in life by wealthy parents. Then notice that the news stories are all about the tiny few who made it in spite of the lack of advantages, precisely because it is surprising and rare.
"Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
And how did their parents get rich?
A large quotient of luck. Bill Gates had average business savvy, but happened to be in the right time at the right place. P.T. Barnum managed to get rich because the schemes he cooked up happened to work, against every prevailing wisdom of the day.
If you want to see how luck plays a very large role in getting rich, check out the follow-up ventures of people who strike it rich - Paul Allen being the poster boy for that. Yes, there's a good chunk of skill, intelligence, hard work and sociopathy involved - but to argue that anyone who has the traits will get rich is ignorant.
Those who can, do. Those who can't, sue.
You're telling the story of the exceptions. That's precisely who everyone writes about and finds interesting. Most wealthy people throughout history are inheritors. Families often keep their wealth through 4 or 5 generations, so for every one 'real' success, you have 30-50 wealthy people who achieve success only because of the helping hand of their ancestors.
"Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
Bravo!
Every time the free market fundamentalists start their proselytizing, we need to remind them where their religion inevitably leads. Randroids are as bad as (and have a great deal in common with) Marxists, in their total inability to separate their belief in what should happen according to their ideals from what actually happens in the real world.
The correlation between ignorance of statistics and using "correlation is not causation" as an argument is close to 1.
When the trucker moves the widget from the factory to the store, he changes its value by moving it from the place of creation to the place of use. Any student of economics knows that major economic leaps have taken place when the costs of this have reduced - from carts to canals, from canals to railways. This is because there are real costs involved; you can regard the energy and investment in moving goods as being exactly as much part of their manufacture as pressing or welding. But the electronic transfer of the stock market transfers ownership at negligible cost and therefore adds no value, so any price increase is simple inflation.
This is exactly what has happened to the economy: house prices inflated, share prices inflated, but the actual value of the underlying assets barely increased. We are now trying to reduce a debt which is purely the difference between perceived value (what people will buy things for) and their inflated value.
The fact that people like you believe the nonsense you have posted is the underlying fact behind the financial crisis.
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."
Communism works, but it doesn't scale. A dozen or a few dozen people can live that way and be fine. A few hundred can't- greed sets in (or the self-selection breaks down). My hypothesis is it breaks down around the time you can't have a personal relationship with most of the other members- its a lot easier to not give a fuck about someone you don't know well.
Laisse Faire capitalism is much the same- it can work among a small self selected group, but doesn't scale up without major abuses. What you want is something in the middle.
I still have more fans than freaks. WTF is wrong with you people?
Originally, the stock market was not a form of gambling but a form of insurance. Investors in trade voyages in the days of sail and marine anarchy expected that some ships would not come back, therefore they wanted to be able to invest in multiple voyages. Joint stock companies formed to carry out a voyage would then sell shares, spreading the risk. (They did this at Lloyd's Coffee House in London.) The sale of shares meant that the money they had invested in the voyage came back to them before the voyage was complete, thus creating liquidity (i.e. the joint stock owners had cash again to invest in new voyages before the first ones returned).
Short term trading is purely gambling, but does not necessarily create any more liquidity than long term investment. Hence my observation that your comment is bogus.
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."
Also not as an argument but just a note: the term you are looking for is Fiat money, paper money originally was just a reciept for gold and you can have fiat coinage as well.
"Fiat money"? Now that's interesting. If we had a monetary system where each unit was worth, say, 1/10000 of the cost of manufacturing an automobile, what impact might that have?
Close, but no cigar.
That 0.01 is NOT taken from somewhere else. It is "generated" but generated from nothing. It is the air in the bubble and then it bursts. We had this long before, the great depression was build on it. EVERYONE speculated. And LOTS of money was being generated it seemed, but where did it come from? Nowhere.
You might have heard of the phrase "your ship coming in". Where does it come from?
At least in part from the old dutch practice of funding the sailing of a cargo ship by writing out shares. Anyone could fund some money to build/outfit a ship and would in turn get a share of the profits it would generate on its voyage. This was a long term investment as a voyage to the far east could take 2 or more years. It was a also risky, you could build a bridge to the far east out of all the lost ships (oh okay, you can't but it sounds dramatic).
Now say that I took a share of 100 florins (a shitload of money but a nice round number to work with). I watch the ship sail and hope that it will come back in 2 years time with a fat cargo of spices that will trade for a fortune. My ship will have come in. Or it will sink.
BUT this ship does not exist in a void. It will encounter other vessels. Say that six months out it has crossed the horn of Africa. A seriously risky part of the journey. It comes across another ship making its way back and this ship reports what has happened to Holland. What happens to my share? Well nothing EXCEPT that SOMEONE might be willing to pay me more then 100 florins for it because the risk of it failing has now been reduced. My share has increased in POTENTIAL value. Someone with 200 florins might buy my share. I get a lower but certain profit while that person will gain less of a profit IF the ship comes in but has a higher chance of it then I did.
Other factors can add or substract from this. Say that it has been a calm year at sea and I get news that dozens of ships are making their way back. The price of spices will fall. Less risk of no return but less profit. Or say that nobody has yet reported on my ship at all. Risk has sky rocketed that it has sunk and my share is without value. Might I sell it lower?
THAT is stock market speculation. Betting on the POTENTIAL value of something. The problem is NOT with the speculation itself. The problem is when the speculation starts to be based on nothing. Those ships need to build, to be sailing, to be buying and selling cargo in order for there to be anything to speculate on. And that seems to get forgotten.
The speculation is no longer about the chances of the ship making it with a good cargo but on the speculation itself. Speculators no longer follow the shipping news but share prices themselves.
Take the recent price drop of BP shares. Why? Because of the oil spill? The company makes 60+ million profit PER DAY! The cost of the oil spill are spare change. Yes it will hurt their bottom line a bit but it is really just the cost of doing business. There should be no selling going on because the company is at no risk. Without speculators, there would be no selling going on. No long-term investor would have a reaosn to sell. Not buy perhaps but not sell since selling when a stock is going down means you are loosing money. Only the short term speculators have to sell because they can't afford to simply wait out their investment and need their money now.
We have allowed the stock market and the banks to turn themselves into "THE economy". A bank should be a service provider that real business makes use of. The same a law firm or cleaning company. Instead they have come to think of themselves as the most important part, the very engine of the economy. It is silly.
Imagine this. A justice system is part of civilization right? But when you consider the justice system to BE civilization, I think you would not like the results.
Don't confuse the means with the end. The tool with the goal.
There is nothing wrong with speculation, there is something wrong with
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
A large quotient of luck. Bill Gates had average business savvy, but happened to be in the right time at the right place.
Bill's family was rich. His mother was on the national board of the United Way - as was IBM's CEO. She put the two together.
So, yes Bill was "in the right place at the right time" - but the only reason he arrived at the right place was because his parents were loaded.
When information is power, privacy is freedom.
...charge a normal goods sales tax on the transaction. Why should stock sales be different from selling anything else? That will slam the kabosh on these fast computer trades.