Another Defeat for Humans

Artificial Intelligence beats the pros in investing:

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.

Yes, I think it’s call front-running — acting on information before anyone else. The strategy was invented by Nathan Rothschild 200 years ago when he used carrier-pigeons to get the 411 on the Battle of Waterloo.
Personally, I’m more impressed than someone actually reads the articles at Yahoo Finance.

Posted by Eddy Elfenbein on June 10th, 2010 at 2:48 pm

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