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> On the 34 companies tested, the MIT researchers' model beat an aggregate Wall Street analyst benchmark in 57.2 percent of quarterly predictions tested in the
by itcrowd 7y ago
> On the 34 companies tested, the MIT researchers' model beat an aggregate Wall Street analyst benchmark in 57.2 percent of quarterly predictions tested in the experiment.
Sorry but I'm not impressed by this number, for various reasons:
- aggregate benchmark means some average of predictions from wall street investors, which is not the "state of the art" to beat, you should beat the best performing funds. Related: the best (and worst) funds are private and don't (all) report performance. Therefore, they are likely not included in the benchmark used and therefore the benchmark is biased.
- 57% doesn't seem that much (only slightly better than chance). Also, there is no variance number
- if they 'win' 1$ in 57% of the cases but 'lost' 2$ in the remaining 43% of the cases it's still a net loss. No numbers are given
- not clear if they are after-casting, i.e. whether they tuned the predictions after the fact happened. In other words: How well does the algorithm perform if you turn it on now and leave it for a year?
- aantix 7y agoIf they don't report performance, how do they gain new investors?
- itcrowd 7y agoAny number of ways. For example pitching behind closed doors to potential customers. Others don't have customers, they trade with their own money (not just small-time traders, by the way).
- aantix 7y agoEventually, there'd have to be a leaked anonymous source? "Fund beats S&P by 20% for 20 years straight" is a good story?
- deepnotderp 7y agoNot at all, you've probably never heard of tgs management for example, a fund comparable to rentec
- aantix 7y agoYou're correct, I never have. I am not understanding how a fund could remain open/transparent enough to build trust with potential investors. But still maintain secrecy over the years.
- ironyman 7y agoBecause they don't trade outside money - tgs and others like it only trade their founder/employee's money. They also enforce strict NDAs with all their employees and business counterparties (data vendors, prime brokers, etc).
- aqme28 7y agoNot all funds are looking for new investors. Some just grow their own money, and outside investors would limit their agility.
- foldingmoney 7y ago>- aggregate benchmark means some average of predictions from wall street investors, which is not the "state of the art" to beat, you should beat the best performing funds. They're not beating funds, they're more accurately predicting company earnings than 'Wall Street analysts' -- people who work for investment banks and write stock notes for clients, not people who actually invest. And the experiment assumes that the job of an analyst is to accurately predict earnings, which is frequently not the case -- analysts often lowball their estimates so that the companies they follow can 'beat and raise'.
- jacques_chester 7y agoIt seems from the outside that analysts jiggle the number that the company gives them and then the company jiggles their own mechanisms to hit the agreed-to number. What tips this is off is absurdly narrow forecast intervals. If I know that Company X's deal size is $10 million, then in what universe is it fair and reasonable for a forecast to be +/- a million bucks?