Larry Swedroe: What Makes Factors Endure

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nedsaid
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Re: Larry Swedroe: What Makes Factors Endure

Post by nedsaid » Thu Jun 14, 2018 11:41 pm

Random Walker wrote:
Thu Jun 14, 2018 11:37 pm
nedsaid wrote:
Thu Jun 14, 2018 11:07 pm

Certainly AI will be a bigger factor in markets but I am skeptical that human emotion will be taken out.
As much as I believe in ruthlessly efficient markets always getting more so, I tend to agree. Just think human emotion can’t get sucked out of the markets no matter how advanced the gizmology gets.

Dave
My best guess is that gizmology will make the effect of human emotion worse. But what do I know?
A fool and his money are good for business.

Random Walker
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Re: Larry Swedroe: What Makes Factors Endure

Post by Random Walker » Thu Jun 14, 2018 11:59 pm

nedsaid wrote:
Thu Jun 14, 2018 11:41 pm
Random Walker wrote:
Thu Jun 14, 2018 11:37 pm
nedsaid wrote:
Thu Jun 14, 2018 11:07 pm

Certainly AI will be a bigger factor in markets but I am skeptical that human emotion will be taken out.
As much as I believe in ruthlessly efficient markets always getting more so, I tend to agree. Just think human emotion can’t get sucked out of the markets no matter how advanced the gizmology gets.

Dave
My best guess is that gizmology will make the effect of human emotion worse. But what do I know?
Yes, like the flash crash several years ago. Didn’t it take quite a while for people doing forensics on that to figure out how it happpened?

stlutz
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Re: Larry Swedroe: What Makes Factors Endure

Post by stlutz » Fri Jun 15, 2018 12:41 am

I don't know, computers and algorithms seem to amplify human emotion. I doubt that AI will be any different. Somehow, greed and fear are still in fashion.

I suppose someone will try baffling AI by doing seemingly really irrational trades. Do weird things in the markets to try to get AI machines to do weirder things in response. I can see someone with big shorts out there trying to freak out the machines to try to get markets to crash. Make the computers just go crazy by trying to create false signals in the markets.
I think you're right. But I think its the case that the computers will create different anomalies in the future than have existed in the past. The past ones are pretty easy for them to arbitrage away. The people who can figure out the new ones that they are creating will be the [rich] geniuses 10 years from now.

Note: I'm not one of those geniuses, so I'll have to settle for the market return.

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nedsaid
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Re: Larry Swedroe: What Makes Factors Endure

Post by nedsaid » Fri Jun 15, 2018 8:31 am

stlutz wrote:
Fri Jun 15, 2018 12:41 am
I don't know, computers and algorithms seem to amplify human emotion. I doubt that AI will be any different. Somehow, greed and fear are still in fashion.

I suppose someone will try baffling AI by doing seemingly really irrational trades. Do weird things in the markets to try to get AI machines to do weirder things in response. I can see someone with big shorts out there trying to freak out the machines to try to get markets to crash. Make the computers just go crazy by trying to create false signals in the markets.
I think you're right. But I think its the case that the computers will create different anomalies in the future than have existed in the past. The past ones are pretty easy for them to arbitrage away. The people who can figure out the new ones that they are creating will be the [rich] geniuses 10 years from now.

Note: I'm not one of those geniuses, so I'll have to settle for the market return.
I remember Jim Cramer admitting on national TV that as a hedge fund manager that he would spread rumors to attempt to drive down the prices of certain stocks. The clip is probably floating around on YouTube somewhere and it amazed some people that this didn't earn him a lifetime ban from the SEC. It is probably just the way the game is played.

I just can't imagine that someone wouldn't try in a similar fashion to send fake market signals to confuse Artificial Intelligence. I mean, how would the Securities Exchange Commission regulate this? If I ran big money, the temptation to sabotage the other guy's AI would be pretty large. Can Artificial Intelligence be manipulated? I know that manipulation works on humans, why not machines?
A fool and his money are good for business.

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nedsaid
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Re: Larry Swedroe: What Makes Factors Endure

Post by nedsaid » Fri Jun 15, 2018 8:39 am

Random Walker wrote:
Thu Jun 14, 2018 11:59 pm
nedsaid wrote:
Thu Jun 14, 2018 11:41 pm
Random Walker wrote:
Thu Jun 14, 2018 11:37 pm
nedsaid wrote:
Thu Jun 14, 2018 11:07 pm

Certainly AI will be a bigger factor in markets but I am skeptical that human emotion will be taken out.
As much as I believe in ruthlessly efficient markets always getting more so, I tend to agree. Just think human emotion can’t get sucked out of the markets no matter how advanced the gizmology gets.

Dave
My best guess is that gizmology will make the effect of human emotion worse. But what do I know?
Yes, like the flash crash several years ago. Didn’t it take quite a while for people doing forensics on that to figure out how it happpened?
This is why I believe factors will endure because you can't take human emotion out of the markets. The old greed and fear thing. In my opinion, factors have primarily a behavioral explanation. Of course they are a risk story too but human nature is involved with risk creation as well.
A fool and his money are good for business.

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triceratop
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Re: Larry Swedroe: What Makes Factors Endure

Post by triceratop » Fri Jun 15, 2018 9:16 am

nedsaid wrote:
Fri Jun 15, 2018 8:31 am
stlutz wrote:
Fri Jun 15, 2018 12:41 am
I don't know, computers and algorithms seem to amplify human emotion. I doubt that AI will be any different. Somehow, greed and fear are still in fashion.

I suppose someone will try baffling AI by doing seemingly really irrational trades. Do weird things in the markets to try to get AI machines to do weirder things in response. I can see someone with big shorts out there trying to freak out the machines to try to get markets to crash. Make the computers just go crazy by trying to create false signals in the markets.
I think you're right. But I think its the case that the computers will create different anomalies in the future than have existed in the past. The past ones are pretty easy for them to arbitrage away. The people who can figure out the new ones that they are creating will be the [rich] geniuses 10 years from now.

Note: I'm not one of those geniuses, so I'll have to settle for the market return.
I remember Jim Cramer admitting on national TV that as a hedge fund manager that he would spread rumors to attempt to drive down the prices of certain stocks. The clip is probably floating around on YouTube somewhere and it amazed some people that this didn't earn him a lifetime ban from the SEC. It is probably just the way the game is played.

I just can't imagine that someone wouldn't try in a similar fashion to send fake market signals to confuse Artificial Intelligence. I mean, how would the Securities Exchange Commission regulate this? If I ran big money, the temptation to sabotage the other guy's AI would be pretty large. Can Artificial Intelligence be manipulated? I know that manipulation works on humans, why not machines?
Here's the video: https://www.youtube.com/watch?v=JEzsfPmh894

It was very well used by Jon Stewart to discredit him as an honest, ethical, and reliable broker of information back in the Daily Show / CNBC wars.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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