>>>This is the obvious way in which markets are different: even though prices get way overinflated from speculators chasing trends, there is in fact a real fundamental value buried in the noise and sooner or later the people who are good at finding that value will outweigh the noise traders and trend chasers.<<<
The problem is that they only do so in the longer run, where as people expect performance on a daily basis from a trader. Here is where social influences come into play. Who do you think will get more commendation from their bosses? A trader who makes an investment based upon intrinsic value that may take years to show? Or, someone who "rode the markets" that day?
The problem is that the free market hypothesis assumes that we are rational beings capable of making cold judgments. Our "rationality" is inexplicably tied to our emotions we may not realize it, but this is something as ubiquitous as our ability to learn language. Ask anyone with a mood disorder and they can tell you just how different the world looks when the balance is tilted. You may argue that I am citing an extreme case, but evidence points out that mood disorders are nothing but abnormal functioning of circuits within our brain. They just happen to expose just how fragile our worlds are.
On the other hand, I've always wondered if it is possible to take advantage of this and make an "infinite money generator". It's a thought experiment really;
Let us say that you have this program running on an impressive machine that scans the entire internet and parses out information related to financial markets, and categorizes it on the basis of stock, the perception attached to that stock and the emotions associated with it (twitter/facebook/the latest fad). It also has data on how this "herd" has behaved before. Let us also assume that AI has born the fruit of accurate simulation of humans at a larger scale.
If we input this data into the program and use it to predict the market do you not think that it will be more successful at making money than a machine designed to work only on the "facts"?
The problem is that they only do so in the longer run, where as people expect performance on a daily basis from a trader. Here is where social influences come into play. Who do you think will get more commendation from their bosses? A trader who makes an investment based upon intrinsic value that may take years to show? Or, someone who "rode the markets" that day?
The problem is that the free market hypothesis assumes that we are rational beings capable of making cold judgments. Our "rationality" is inexplicably tied to our emotions we may not realize it, but this is something as ubiquitous as our ability to learn language. Ask anyone with a mood disorder and they can tell you just how different the world looks when the balance is tilted. You may argue that I am citing an extreme case, but evidence points out that mood disorders are nothing but abnormal functioning of circuits within our brain. They just happen to expose just how fragile our worlds are.
On the other hand, I've always wondered if it is possible to take advantage of this and make an "infinite money generator". It's a thought experiment really;
Let us say that you have this program running on an impressive machine that scans the entire internet and parses out information related to financial markets, and categorizes it on the basis of stock, the perception attached to that stock and the emotions associated with it (twitter/facebook/the latest fad). It also has data on how this "herd" has behaved before. Let us also assume that AI has born the fruit of accurate simulation of humans at a larger scale.
If we input this data into the program and use it to predict the market do you not think that it will be more successful at making money than a machine designed to work only on the "facts"?