5 ms·

I don't think this is true. Capital allocation is generally the work of humans. Very very few of the significant capital allocators make any use of AI.

soundwave106 10y ago
I guess it depends on how you look at it. I'm pretty sure all of the major finance firms have a department dedicated to algorithmic trading, some of which utilizes machine learning. Algorithmic trading has been estimated to be as high as 60-70% of all trades at one point (it's slacked off a bit recently.) (http://www.investopedia.com/articles/investing/091615/world-high-frequency-algorithmic-trading.asp http://www.investopedia.com/articles/investing/091615/world-...) A lot of algorithmic trading is more to take advantage of short term arbitrage scenarios, though. The driving factor for the long term (that is, the "human life" part) is still human driven.
- auntienomen 10y ago
  I look at in terms of dollars/euros/yen/etc allocated. Virtually all of this money is allocated by pension funds, mutual funds, sovereign wealth funds, and similar behemoths. They may be using ML to improve their execution -- more likely they've outsourced execution to third parties who use ML -- but they are _not_ using ML to make the capital allocation decisions. Nor are they profiting significantly from short term arbitrage opportunities. Capital allocators worth mentioning generally are handling trillions of dollars. The largest arbitrageurs are incapable of handling more than $10-20 billion. This is rounding error in the world of capital allocation. EDIT: The 50%+ figures you're quoting measure daily trading volumes, which is not the same thing as capital allocation. Most of those traders don't hold positions overnight; they don't do capital allocation. (Imagine how a startup founder would feel if his investors took away their invested cash after 5pm every night.)

soundwave106 10y ago

I guess it depends on how you look at it. I'm pretty sure all of the major finance firms have a department dedicated to algorithmic trading, some of which utilizes machine learning. Algorithmic trading has been estimated to be as high as 60-70% of all trades at one point (it's slacked off a bit recently.) (http://www.investopedia.com/articles/investing/091615/world-high-frequency-algorithmic-trading.asp http://www.investopedia.com/articles/investing/091615/world-...) A lot of algorithmic trading is more to take advantage of short term arbitrage scenarios, though. The driving factor for the long term (that is, the "human life" part) is still human driven.

auntienomen 10y ago
I look at in terms of dollars/euros/yen/etc allocated. Virtually all of this money is allocated by pension funds, mutual funds, sovereign wealth funds, and similar behemoths. They may be using ML to improve their execution -- more likely they've outsourced execution to third parties who use ML -- but they are _not_ using ML to make the capital allocation decisions. Nor are they profiting significantly from short term arbitrage opportunities. Capital allocators worth mentioning generally are handling trillions of dollars. The largest arbitrageurs are incapable of handling more than $10-20 billion. This is rounding error in the world of capital allocation. EDIT: The 50%+ figures you're quoting measure daily trading volumes, which is not the same thing as capital allocation. Most of those traders don't hold positions overnight; they don't do capital allocation. (Imagine how a startup founder would feel if his investors took away their invested cash after 5pm every night.)