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Ok, so half-guessing at what you meant, wouldn't this be the crux of the problem then: > In other words, every time a security is traded, its price is updated
by vanderZwan 9y ago
Ok, so half-guessing at what you meant, wouldn't this be the crux of the problem then:
> In other words, every time a security is traded, its price is updated with a very small amount of new information.
The update happens after trading, so before that the price is by definition outdated, meaning it has that bit of "inefficiency" you spoke about. Hence "doing your homework" as a hedge-fund manager would in theory allow you to spot this inefficiency and make better trades.
- dsacco 9y agoYes, that's mostly correct. But I'm not sure what your question is. It's not enough to have the data, you also have to have reasonable confidence in how the price will change once the information does impact the market. There's practically an eternity of information available, but you can't use all of it. You have to pick and choose. Moreover, you have to choose how much to weight any particular set of data with respect to another. This is not to say that most hedge funds are right to ignore any given set of meaningful data. It just means that they have to make decisions about which data to use and how much they'll prioritize it. Then they have to see if they have the requisite infrastructure to trade on that information before anyone else.