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."
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
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
>The free market is better than anything else
Citation required.
Open Source Drum Kit, LPLC deve board - mjhdesigns.com
Bullshit. The free market is what led us to the brink of economic collapse. Short term trading is probably the largest factor in the rather routine occurrence of market failures. Because the average period for holding a stock is around 6 months, there's no incentive for corporations to look any further into the future. Even when the risk is terribly obvious they don't do anything to avert it. There's been a steady drumbeat in recent decades for fewer dividends and more growth. The problem is that dividends are paid to investors as a way of keeping them around, and as it turns out it's a lot harder to have steady growth and a regular dividend than it is to grow for periods.
And actually you've got it backwards, if you've got a massive portfolio then you should be required to wait longer than smaller investors. Small investors cause far fewer problems in this respect that institutional ones do. They can do crazy things like sell a portion of their holdings triggering a panic, then buy them back knowing what the price will be in a few moments time. The suggestion you're making that they don't harm everybody else is ultimately bullshit.
I assume you've never heard of "dividends." They're what used to drive investments prior to computers. Back in the day people would rarely buy and sell on a time period of less than a couple years, because it was somewhat difficult to get in and out efficiently. Hell, I remember even in the 80s, you'd typically be restricted to only checking prices once a day. Well, unless you were a broker or were glued to the TV.
What that does is decrease the cut that the matchmakers get for brokering the deal. However it doesn't harm the market, there are still stocks, most notably Berkshire Hathaway, which are barely liquid and they do just fine. You just Don't expect to trade it immediately. I know it's terrible to possibly have to wait an hour or two, but it's worth it if it cuts these jack ass jackal cheats out of the picture.
Here's the difference.
The economy as a whole isn't a zero sum game. I invest some money in a company, it makes something of value and increases the overall size of the economy and (rightly) pays dividends.
20 minute speculative bets are zero sum. In 20 minutes nothing of value was created. When I buy something for a $1 and then sell it for $1.01 twenty minutes latter I'm not growing the economy, I'm taking $0.01 from someone else.
This shit is perverse. Not only does it destabilize the economy, it's literally skimming money off the top of the real economy to line the pockets of a few wealthy investors and traders who, speaking from an economic perspective are dead weight. (and then they complain about welfare...)
You should read up on the free market. What we have is not a free market. All the regulations you support are there to attempt to fix problems caused by yet other regulations.
This argument is just silly. A regulation-free market is just another name for anarchy. You wish you had more money than that other trader? No problem, shoot him and take his money, or kidnap his kids and slit their throats unless he agrees to buy them back from you. Don't want something similar to happen to you? No problem, hire a private army of mercenaries to protect yourself. One of your mercenaries is getting a bit ambitious, and sneaking into your room to murder you in the night? Tough, you should have hired a more reliable mercenary.
Regulations are there so that people can conduct their business with at least some confidence that they won't be completely screwed over by every other actor in the market at the first opportunity. Without that confidence, people simply wouldn't trade -- they'd keep all of their money in a locked box in their basement, and spend it mainly on armed guards, and there would be no market, "free" or otherwise.
Yes, some regulations are no doubt unnecessary. But to say that all regulations are only "there to attempt to fix the problems caused by yet other regulations" is to throw out the baby with the bathwater.
I don't care if it's 90,000 hectares. That lake was not my doing.
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."
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
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
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."
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."
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.