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Breaking news: robots and humans both equally unable to predict the next digit in a random sequence. Obviously an incredible over simplification of whats happe

Breaking news: robots and humans both equally unable to predict the next digit in a random sequence. Obviously an incredible over simplification of whats happening in finance and this article.

headmelted 9y ago
Probably not that much of an oversimplification. Side note: Why is it that we need something so physical to attach these concepts to? The photo of the monolithic POWER7 rig that houses Watson with it's translucent logo is akin to all of the Bitcoin articles with shiny gold coins with an icon. I understand the need to have some kind of image, but it's just so detached from the reality of what's going on in practice. Getting back on topic, I do wonder how much data they're feeding in - it's one thing to pass masses of historical trades into the algorithm, quite another to have it watch for relevant news events that affect the asset prices.
- mevile 9y ago
  > Side note: Why is it that we need something so physical to attach these concepts to? Posts with images get more clicks.
danieltillett 9y ago
The problem is not that the sequence is random (it isn’t), but that the seed changes on a regular basis.
- manmal 9y ago
  Since our reality is based on randomness at a very low level (eg radiation patterns), what makes you believe that this randomness is somehow lost on a higher level?
  - danieltillett 9y ago
    Because there is true signal in the way markets move (after all fundamentally the movements are based macro and micro economics events). People find patterns in the data that occur at a far higher rate than chance even once you account for data mining. The problem is a system that works in one era doesn't work in another.
    - manmal 9y ago
      I agree, there are patterns (as everywhere in nature), but they are highly probabilistic because they are noisy due to randomness.
  - freeflight 9y ago
    > randomness at a very low level (eg radiation patterns) Sometimes I wonder if one couldn't actually decipher these background radiation patterns, given enough resolution in sensors and enough calculation power to crunch possible models fitting the patterns. Imho not even the drop of a dice is random and a seed is nothing but a pre-defined set of variables. But at that point, we could probably just simulate our own realities.
    - manmal 9y ago
      I‘m no expert and all, but AFAIK there is true randomness going on in quantum effects. Here is a nice discussion: https://physics.stackexchange.com/a/210609 https://physics.stackexchange.com/a/210609
IncRnd 9y ago
The entirety of the article is summed up with this statement hidden inside. > Mr. Amador attributed the underperformance to a normal variability in returns. The fund’s programming beat the market when tested against historical data, he said, and he expects the same in real life as time passes. Backfitting in all its forms is known to give false confidence and usually fails. It may work for a moment, but then other traders exploit whatever the backfitting had noticed causing the backfit to no longer work.
FeepingCreature 9y ago
It's compression, not noise. Markets compress corporate reality. A perfectly compressed stream is by definition perfectly random (because if it had a predictable pattern, you could use that to compress it further), but the getting there is different - markets are not intrinsically but mechanically random; they approach randomness because of how they operate. The hope is that humans are not all that good at compression, so AI may be able to pick up on patterns that we can't.
bufferoverflow 9y ago
That's just not true. There are whole companies based on algorithmic trading. Jane Street, for instance, has a tech talk on how they take advantage of Caml in automated trading. https://www.youtube.com/watch?v=hKcOkWzj0_s https://www.youtube.com/watch?v=hKcOkWzj0_s

Breaking news: robots and humans both equally unable to predict the next digit in a random sequence. Obviously an incredible over simplification of whats happening in finance and this article.

headmelted 9y ago

Probably not that much of an oversimplification. Side note: Why is it that we need something so physical to attach these concepts to? The photo of the monolithic POWER7 rig that houses Watson with it's translucent logo is akin to all of the Bitcoin articles with shiny gold coins with an icon. I understand the need to have some kind of image, but it's just so detached from the reality of what's going on in practice. Getting back on topic, I do wonder how much data they're feeding in - it's one thing to pass masses of historical trades into the algorithm, quite another to have it watch for relevant news events that affect the asset prices.

mevile 9y ago
> Side note: Why is it that we need something so physical to attach these concepts to? Posts with images get more clicks.

danieltillett 9y ago

The problem is not that the sequence is random (it isn’t), but that the seed changes on a regular basis.

manmal 9y ago
Since our reality is based on randomness at a very low level (eg radiation patterns), what makes you believe that this randomness is somehow lost on a higher level?
- danieltillett 9y ago
  Because there is true signal in the way markets move (after all fundamentally the movements are based macro and micro economics events). People find patterns in the data that occur at a far higher rate than chance even once you account for data mining. The problem is a system that works in one era doesn't work in another.
  - manmal 9y ago
    I agree, there are patterns (as everywhere in nature), but they are highly probabilistic because they are noisy due to randomness.
- freeflight 9y ago
  > randomness at a very low level (eg radiation patterns) Sometimes I wonder if one couldn't actually decipher these background radiation patterns, given enough resolution in sensors and enough calculation power to crunch possible models fitting the patterns. Imho not even the drop of a dice is random and a seed is nothing but a pre-defined set of variables. But at that point, we could probably just simulate our own realities.
  - manmal 9y ago
    I‘m no expert and all, but AFAIK there is true randomness going on in quantum effects. Here is a nice discussion: https://physics.stackexchange.com/a/210609 https://physics.stackexchange.com/a/210609

IncRnd 9y ago

The entirety of the article is summed up with this statement hidden inside. > Mr. Amador attributed the underperformance to a normal variability in returns. The fund’s programming beat the market when tested against historical data, he said, and he expects the same in real life as time passes. Backfitting in all its forms is known to give false confidence and usually fails. It may work for a moment, but then other traders exploit whatever the backfitting had noticed causing the backfit to no longer work.

FeepingCreature 9y ago

It's compression, not noise. Markets compress corporate reality. A perfectly compressed stream is by definition perfectly random (because if it had a predictable pattern, you could use that to compress it further), but the getting there is different - markets are not intrinsically but mechanically random; they approach randomness because of how they operate. The hope is that humans are not all that good at compression, so AI may be able to pick up on patterns that we can't.

bufferoverflow 9y ago

That's just not true. There are whole companies based on algorithmic trading. Jane Street, for instance, has a tech talk on how they take advantage of Caml in automated trading. https://www.youtube.com/watch?v=hKcOkWzj0_s https://www.youtube.com/watch?v=hKcOkWzj0_s