4 ms·

EDIT: This is total conjecture. only 1 or at most a few of those 21 features represent real data. The real data represents similar information to the insider i

EDIT: This is total conjecture. only 1 or at most a few of those 21 features represent real data. The real data represents similar information to the insider information which they wish to act upon. Example data prep: 1. Insider source says that a contract is falling through, a patent is being filed for, quarterly numbers have been missed/surpassed etc. 2. Similar information is gathered from historic performance data of the company, similar companies or market segments. 3. The information is correlated with whatever metric they wish to move along and encoded in one of the 21 feature classes. 4. Repeat for whatever relevant information that can be linked to the insider source - i.e. competing companies, re-encoding separately for long and short positions etc. 5. Fill in remainder of 21 feature classes with noise. 6. Profit.

victor9000 10y ago
aka parallel construction
gohrt 10y ago
What would be the point of all this? Step 1 is the illegal part, and the other steps don't erase that.
- iamthepieman 10y ago
  it's like if law enforcement uses a legally questionable tactic to get information about someone. Then, with the help of that illegally obtained knowledge, they can go and re-create it (along with a legal paper trail) via other perfectly legal means.
- foota 10y ago
  Seems that it would make detecting it more difficult
- poikniok 10y ago
  Well of course it is illegal, you just don't want to get caught, and this allows you to have plausible deniability.
yellowstuff 10y ago
I'm not sure how seriously you were proposing this, but I would rank it's plausibility as being in the vicinity of Guam tipping over and sinking from the weight of a military base. Inside traders are usually caught because they make profitable trades shortly before significant company events, or they're caught communicating with the tipper. This wouldn't protect from that. Once they're being investigated having a plausible reason for making the trade is mostly irrelevant. If you have no reason other than inside information for trading and just say "I felt like gambling" it doesn't matter. If they can't actually prove you had the inside information you're innocent. If they can prove you had illegal inside information it doesn't matter if you can prove that you made the trade for unrelated reasons. You're guilty.
gwern 10y ago
Needlessly convoluted. It would be much simpler to create Numerai as described, and participate oneself, uploading the 'predictions'. The key Numerai person can de-anonymize it by looking up the mapping of the 1 stock with insider information, and adding a big buy on that one. (I'm not sure if participants upload their model to be run by Numerai or just provide their predictions based on a public data feed; I think it's the latter, but even if it's the former, you can just create a model optimized to emit a big buy on the key stock and otherwise random & self-canceling.) The rest of the data can (and should be, in case of SEC investigation, as using large-scale real data would generate lots of paper trails like payment to data providers) be genuine and released as described - who knows, the participants might actually find real signals which are profitable and also mask the insider trading.

victor9000 10y ago

aka parallel construction

gohrt 10y ago

What would be the point of all this? Step 1 is the illegal part, and the other steps don't erase that.

iamthepieman 10y ago
it's like if law enforcement uses a legally questionable tactic to get information about someone. Then, with the help of that illegally obtained knowledge, they can go and re-create it (along with a legal paper trail) via other perfectly legal means.
foota 10y ago
Seems that it would make detecting it more difficult
poikniok 10y ago
Well of course it is illegal, you just don't want to get caught, and this allows you to have plausible deniability.

yellowstuff 10y ago

I'm not sure how seriously you were proposing this, but I would rank it's plausibility as being in the vicinity of Guam tipping over and sinking from the weight of a military base. Inside traders are usually caught because they make profitable trades shortly before significant company events, or they're caught communicating with the tipper. This wouldn't protect from that. Once they're being investigated having a plausible reason for making the trade is mostly irrelevant. If you have no reason other than inside information for trading and just say "I felt like gambling" it doesn't matter. If they can't actually prove you had the inside information you're innocent. If they can prove you had illegal inside information it doesn't matter if you can prove that you made the trade for unrelated reasons. You're guilty.

gwern 10y ago

Needlessly convoluted. It would be much simpler to create Numerai as described, and participate oneself, uploading the 'predictions'. The key Numerai person can de-anonymize it by looking up the mapping of the 1 stock with insider information, and adding a big buy on that one. (I'm not sure if participants upload their model to be run by Numerai or just provide their predictions based on a public data feed; I think it's the latter, but even if it's the former, you can just create a model optimized to emit a big buy on the key stock and otherwise random & self-canceling.) The rest of the data can (and should be, in case of SEC investigation, as using large-scale real data would generate lots of paper trails like payment to data providers) be genuine and released as described - who knows, the participants might actually find real signals which are profitable and also mask the insider trading.