Prediction is intelligence. Why is there not more discussion about stock picks here? Is it low status? Does everyone believe in strong forms of efficient market ?
(edited—curious where it goes without leading the witness)
1) Prediction is not intelligence. Intelligence is goal-driven action, which makes use of conditional prediction (if I do X, Y is more likely).
2) stocks are a game where the vast majority of us are at an information disadvantage. It only takes a very weak efficient market to make it unbeatable by the layperson.
3) stock picks are useless for reason #2.
4) calling something low-status is low-status around here. You’re better off decomposing the reasons something might affect peer perceptions of the poster.
I personally expect that if something like that worked at all, it’d get incorporated into the standard algorithms and the effect will go away (per the mentioned EMH) within a few months of publication (and note that it’s a 2013 paper).
My interpretation of the general sentiment is that market prediction, for it to be remarkably fruitful, has long escaped the possibility for a single individual who is not already blessed by a crapload of money.
Yeah my comment implicitely assumed that one would have wanted to profit from said predictions. Still I doubt that a fruitful algorithm for prediction can run on a home computer.
Even if you don’t believe in the efficient market, picking publically traded stocks yourself means that you believe you can win in zero-sum games against professional investors who are supported by huge computer models and research analysts.
If you have inside information about a company that’s not known to the professional investors you might make good trades but you are also violating the law and it would be stupid to publically talk about your trades and their justification on a forum like this.
Another way to make money is to bet on effects that are illiquid enough that professional investors aren’t interested. If you have found a trade from which $10,000 can be extracted you are also not benefiting from being public about your predictions.
A friend for example used to do arbitrage between different bitcoin markets. While that happened to be profitable, it was stupid to talk about it in a public venue like this.
If you have inside information about a company that’s not known to the professional investors you might make good trades but you are also violating the law
As an aside, it’s worth noting that insider trading isn’t illegal per se (in the U.S.). When inside traders are prosecuted it’s often on the logic that they’ve unlawfully stolen information from the company that they work at, rather than that the trading itself is unfair. If you’re walking down the street and find a document that someone has dropped then I believe you can just trade on that information—you have no duty to the company who owns the information. (This is not legal advice.)
Insider training isn’t just about an obligation to the company in question. Investopedia:
Insider information is a non-public fact regarding the plans or condition of a publicly traded company that could provide a financial advantage when used to buy or sell shares of the company’s stock. Insider information is typically gained by someone who is working within or close to a listed company. If a person uses insider information to place trades, he or she can be found guilty of insider trading. Insider trading is illegal when the material information has not been made public and has been traded on. This is because the information gives those having this knowledge an unfair advantage.
There doesn’t seems to be a consensus on this. Also Investopedia
A standard used by the Securities and Exchange Commission (SEC) to determine whether someone who receives and acts on insider information (a tippee) is guilty of insider trading. The Dirks Test looks for two criteria
Whether the individual breached the company’s trust
Whether the individual did so knowingly
Tippees can be found guilty of insider trading if they know or should know that the tipper has committed a breach of fiduciary duty.
The Court held that “a duty to disclose under section 10(b) does not arise from the mere possession of nonpublic market information.” Chiarella had no “fiduciary relationship” with either company, nor was he an agent of either company, Chiarella had no duty to disclose the privileged information, and he did not receive confidential information from the targeted companies.
I think that maybe the situation is that the SEC wants insider trading to be illegal but the Supreme Court doesn’t.
Prediction is intelligence. Why is there not more discussion about stock picks here? Is it low status? Does everyone believe in strong forms of efficient market ?
(edited—curious where it goes without leading the witness)
1) Prediction is not intelligence. Intelligence is goal-driven action, which makes use of conditional prediction (if I do X, Y is more likely).
2) stocks are a game where the vast majority of us are at an information disadvantage. It only takes a very weak efficient market to make it unbeatable by the layperson.
3) stock picks are useless for reason #2.
4) calling something low-status is low-status around here. You’re better off decomposing the reasons something might affect peer perceptions of the poster.
Just to contradict myself, things like http://cs229.stanford.edu/proj2013/TakeuchiLee-ApplyingDeepLearningToEnhanceMomentumTradingStrategiesInStocks.pdf are somewhat interesting in that they concretely show an application of data.
I personally expect that if something like that worked at all, it’d get incorporated into the standard algorithms and the effect will go away (per the mentioned EMH) within a few months of publication (and note that it’s a 2013 paper).
There is a great number of things that a layperson cannot do well. On LW the oft-expressed view is that the market is unbeatable by anyone.
My interpretation of the general sentiment is that market prediction, for it to be remarkably fruitful, has long escaped the possibility for a single individual who is not already blessed by a crapload of money.
Market prediction doesn’t require money.
Yeah my comment implicitely assumed that one would have wanted to profit from said predictions.
Still I doubt that a fruitful algorithm for prediction can run on a home computer.
Prediction is not intelligence. Good predictions are one of the signs of intelligence.
Apply intelligence :-) If you want to extract money out of financial markets, is picking stocks the right place to be?
Even if you don’t believe in the efficient market, picking publically traded stocks yourself means that you believe you can win in zero-sum games against professional investors who are supported by huge computer models and research analysts.
If you have inside information about a company that’s not known to the professional investors you might make good trades but you are also violating the law and it would be stupid to publically talk about your trades and their justification on a forum like this.
Another way to make money is to bet on effects that are illiquid enough that professional investors aren’t interested. If you have found a trade from which $10,000 can be extracted you are also not benefiting from being public about your predictions. A friend for example used to do arbitrage between different bitcoin markets. While that happened to be profitable, it was stupid to talk about it in a public venue like this.
As an aside, it’s worth noting that insider trading isn’t illegal per se (in the U.S.). When inside traders are prosecuted it’s often on the logic that they’ve unlawfully stolen information from the company that they work at, rather than that the trading itself is unfair. If you’re walking down the street and find a document that someone has dropped then I believe you can just trade on that information—you have no duty to the company who owns the information. (This is not legal advice.)
Insider training isn’t just about an obligation to the company in question. Investopedia:
There doesn’t seems to be a consensus on this. Also Investopedia
See also Chiarella v. United States:
I think that maybe the situation is that the SEC wants insider trading to be illegal but the Supreme Court doesn’t.
Okay, that seems like there’s more room for doing legal insider training.