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I'm more than willing to believe there's insider trading, but the data presented at the beginning is not convincing. > Of the 496 trades [Filler has] made sinc

by imgabe 5y ago

I'm more than willing to believe there's insider trading, but the data presented at the beginning is not convincing. > Of the 496 trades [Filler has] made since 2014 in Alabama’s ServisFirst Bancshares Inc., where he sits on the board of directors, and Century Bancorp Inc. of Massachusetts, where he’s the largest shareholder, 372 of them, or 75%, have shown a profit three months later. > Besides Filler, other TipRanks stars include Steve Mihaylo, the CEO of telephone services company Crexendo Inc., where he owns a $60 million stake. Mihaylo has turned a three-month profit on 83% of his trades over the past five years even as Crexendo’s shares have seesawed. We've also had an unprecedented bull market over the past 10 years. If you pick any random stock at any time and hold it for three months, what are the odds that it will be worth more? The article compares the returns to the S&P500, but that is the net performance of those 500 stocks. You'd have to compare it to the base rate of picking a random stock to see if it's actually remarkable. Maybe the S&P 500 performed lower because 75% of the stocks in it went up and 25% went down. But that means that if you randomly pick one stock, you'd have a 75% chance of it being one of the ones that went up, and you'd outperform the S&P500. (Well, not quite, maybe it could go up, but not as much as the S&P500 as a whole. But still, most of the stocks that go up, would have to go up more than the average of the whole index in order to compensate for the ones that go down) Later in the article, when they mention that insiders tend to reliably sell stock ahead of bad news, that seems much more damning.

Retric 5y ago
Individual stocks are surprisingly random across three month stretches even in bull markets. 75% is significantly outperforming in terms of random individual stock picks over the last 10 years. The real issue is people wouldn’t bring it up if the number wasn’t “shocking”. Which self selects for outliers.
- zeptonix 5y ago
  Right, stocks [which are just proxies for companies] are completely random because of <random bs paper from E. Fama from 51 years ago>. Because, of course, how would it ever be possible to predict how a company might perform? That must surely be impossible, because TradFi economics has decided it must be. And then people just continually parrot the same stuff they've heard and it becomes more and more accepted as fact. I just hate hearing these same narratives being repeated because... they've already been repeated. Why must stock returns be random? It's predicting whether a company is going to do well or not, which has nothing to do with randomness. And yet people (like this commenter) just keep repeating this stuff, absolutely endlessly. They don't even know why they're doing it (try asking him) -- they just keep doing it.
  - myownpetard 5y ago
    > It's predicting whether a company is going to do well or not, which has nothing to do with randomness. You're right that that has little to do with randomness. But it also has little to do with investing.
  - YZF 5y ago
    You're misinterpreting what random paper says. Random paper (Fama et al.) doesn't say it's impossible to predict how well a company performs. It says why do you think you can predict better than the 1000 Ph.D. employed by trading co. inc. when all of you have access to the same public information? So the price of the company's stock is going to converge to some number that already reflects the known information. Not sure where you're getting the stock returns are random bit either.
    - sokoloff 5y ago
      The “random” bit seems to be coming from Retric’s comment to which they are replying.
    - bredren 5y ago
      Despite the downvotes, I am in generally in support of GP. If you read hn a lot and built a lot over the past decade it hasn’t been hard to predict better than “a 1000 phds” which companies would win. NVIDIA, apple, even small plays like twilio. It was obvious these companies had big leads in stuff that made money. Go back and read the Cloudflare IPO filing thread here. That opened at what, $16? You read the R2 thread from a few days ago it is again obvious AWS will bleed some of the most influential engineers when this becomes generally available. I don’t have a PhD mind you, but I would presume this will lead to entire companies moving to CF for some primitives, eventually CF pick up entire accounts. Do PhDs at trading companies get annoyed because some AWS services still will only respond with plain/text in api responses containing json? That they have to write a custom parser as a result? Or that the UI for AWS SNS in setting up an HTTPS subscriber kinda sucks? Like it was mostly done but worked so people got pulled elsewhere? Do wall street PhDs realize the bundling of expensive AWS cloud primitives to use other AWS cloud products is anti-customer, and that maybe this is going to translate to devs voting with their feet when CF makes this move? Heck, even the R2 announcement makes the egress fees issue clear in plain English. There are tons of comments validating that pain. Business people shouldn’t need a lot of convincing. Do the above observations and experiences working with AWS and reading others experiences add up to more knowledge than 1000 PhDs? I wouldn’t have thought so, but the value of an academic degree has been on a downward spiral for some time.
jacquesm 5y ago
Statistically speaking I'd say those numbers more than warrant further investigation.
dogman144 5y ago
There’s very strong data on call purchases and other derivatives short of buying the specific stock, immediately before good news. You can run into this data via reading academic stuff efficient market hypothesis, as the front running damages the theory a bit and has led to shifts in how to explain EMH (semi-EMH, etc). This data has been around for years
- zz865 5y ago
  If you rarely trade then start buying short dated OOM calls just before news is a easy way to get a call from the SEC.
  - dogman144 5y ago
    Not sure what you’re getting at. Data is there in Econ circles for a long time. Check it out
ashtonkem 5y ago
75% success rate for one trader is suspiciously high. Generally most active traders under-perform the market they're trading in, even a bull one.
- jallen_dot_dev 5y ago
  > Generally most active traders under-perform the market they're trading in, even a bull one. But if the market has been going up, even underperforming it means you can still make a profit (unless you significantly underperform). The quoted text in the gp is just talking about profit, not comparing to the market.
jallen_dot_dev 5y ago
Right, whether or not 75% is suspicious depends entirely on the price action of the stock. If it has been trending up, there will be relatively fewer 3-month periods where the stock is down than if it is flat or trending down. SFBS is up from 13.25 to 79.61 and CNBKA is up from 32.95 to 115.22 since 2014. If the price movement was completely random with no bias up or down, and you entered trades at completely random times, then you would expect 50% of trades to be profitable 3 months later. So 50% is our baseline. Then consider that these stocks have been going up. THEN consider that you don't have to enter trades at completely random times; if you buy during a dip, the price merely needs to return to the mean for you to be up.
shapefrog 5y ago
A blind chimp could have a 90% sucess rate if the endpoint is holding for 3 months in the period 2014 to 2021. What isnide information are they suggesting that the CEO of a phone services company has? > If you pick any random stock at any time and hold it for three months, what are the odds that it will be worth more? High, very high if you filter down to the most likely stocks that would be traded, apple etc.
bostik 5y ago
> 72 of them, or 75%, have shown a profit three months later. That is surprisingly close to the number Matt Levine reported on some time ago. A group was trading almost exclusively on insider information, and (IIRC) 77% of their trades made a profit. It's a massive edge over other market participants, but only goes to show that even with that kind of information at your disposal, you are still not guaranteed to make money on every trade. I wish I could find the article. The overlap between "Matt Levine article" and "insider trading" sets is large enough to make any search for a particular piece of news a needle/haystack problem. EDIT: to clarify - when you are trading on inside information with the goal of making a quick buck, you are not interested in how the company will do in short term. You are trying to predict how the market in aggregate will react to that same information, once it becomes public.

by imgabe 5y ago

Retric 5y ago

Individual stocks are surprisingly random across three month stretches even in bull markets. 75% is significantly outperforming in terms of random individual stock picks over the last 10 years. The real issue is people wouldn’t bring it up if the number wasn’t “shocking”. Which self selects for outliers.

zeptonix 5y ago
Right, stocks [which are just proxies for companies] are completely random because of <random bs paper from E. Fama from 51 years ago>. Because, of course, how would it ever be possible to predict how a company might perform? That must surely be impossible, because TradFi economics has decided it must be. And then people just continually parrot the same stuff they've heard and it becomes more and more accepted as fact. I just hate hearing these same narratives being repeated because... they've already been repeated. Why must stock returns be random? It's predicting whether a company is going to do well or not, which has nothing to do with randomness. And yet people (like this commenter) just keep repeating this stuff, absolutely endlessly. They don't even know why they're doing it (try asking him) -- they just keep doing it.
- myownpetard 5y ago
  > It's predicting whether a company is going to do well or not, which has nothing to do with randomness. You're right that that has little to do with randomness. But it also has little to do with investing.
- YZF 5y ago
  You're misinterpreting what random paper says. Random paper (Fama et al.) doesn't say it's impossible to predict how well a company performs. It says why do you think you can predict better than the 1000 Ph.D. employed by trading co. inc. when all of you have access to the same public information? So the price of the company's stock is going to converge to some number that already reflects the known information. Not sure where you're getting the stock returns are random bit either.
  - sokoloff 5y ago
    The “random” bit seems to be coming from Retric’s comment to which they are replying.
  - bredren 5y ago
    Despite the downvotes, I am in generally in support of GP. If you read hn a lot and built a lot over the past decade it hasn’t been hard to predict better than “a 1000 phds” which companies would win. NVIDIA, apple, even small plays like twilio. It was obvious these companies had big leads in stuff that made money. Go back and read the Cloudflare IPO filing thread here. That opened at what, $16? You read the R2 thread from a few days ago it is again obvious AWS will bleed some of the most influential engineers when this becomes generally available. I don’t have a PhD mind you, but I would presume this will lead to entire companies moving to CF for some primitives, eventually CF pick up entire accounts. Do PhDs at trading companies get annoyed because some AWS services still will only respond with plain/text in api responses containing json? That they have to write a custom parser as a result? Or that the UI for AWS SNS in setting up an HTTPS subscriber kinda sucks? Like it was mostly done but worked so people got pulled elsewhere? Do wall street PhDs realize the bundling of expensive AWS cloud primitives to use other AWS cloud products is anti-customer, and that maybe this is going to translate to devs voting with their feet when CF makes this move? Heck, even the R2 announcement makes the egress fees issue clear in plain English. There are tons of comments validating that pain. Business people shouldn’t need a lot of convincing. Do the above observations and experiences working with AWS and reading others experiences add up to more knowledge than 1000 PhDs? I wouldn’t have thought so, but the value of an academic degree has been on a downward spiral for some time.

jacquesm 5y ago

Statistically speaking I'd say those numbers more than warrant further investigation.

dogman144 5y ago

There’s very strong data on call purchases and other derivatives short of buying the specific stock, immediately before good news. You can run into this data via reading academic stuff efficient market hypothesis, as the front running damages the theory a bit and has led to shifts in how to explain EMH (semi-EMH, etc). This data has been around for years

zz865 5y ago
If you rarely trade then start buying short dated OOM calls just before news is a easy way to get a call from the SEC.
- dogman144 5y ago
  Not sure what you’re getting at. Data is there in Econ circles for a long time. Check it out

ashtonkem 5y ago

75% success rate for one trader is suspiciously high. Generally most active traders under-perform the market they're trading in, even a bull one.

jallen_dot_dev 5y ago
> Generally most active traders under-perform the market they're trading in, even a bull one. But if the market has been going up, even underperforming it means you can still make a profit (unless you significantly underperform). The quoted text in the gp is just talking about profit, not comparing to the market.

jallen_dot_dev 5y ago

Right, whether or not 75% is suspicious depends entirely on the price action of the stock. If it has been trending up, there will be relatively fewer 3-month periods where the stock is down than if it is flat or trending down. SFBS is up from 13.25 to 79.61 and CNBKA is up from 32.95 to 115.22 since 2014. If the price movement was completely random with no bias up or down, and you entered trades at completely random times, then you would expect 50% of trades to be profitable 3 months later. So 50% is our baseline. Then consider that these stocks have been going up. THEN consider that you don't have to enter trades at completely random times; if you buy during a dip, the price merely needs to return to the mean for you to be up.

shapefrog 5y ago

A blind chimp could have a 90% sucess rate if the endpoint is holding for 3 months in the period 2014 to 2021. What isnide information are they suggesting that the CEO of a phone services company has? > If you pick any random stock at any time and hold it for three months, what are the odds that it will be worth more? High, very high if you filter down to the most likely stocks that would be traded, apple etc.

bostik 5y ago

> 72 of them, or 75%, have shown a profit three months later. That is surprisingly close to the number Matt Levine reported on some time ago. A group was trading almost exclusively on insider information, and (IIRC) 77% of their trades made a profit. It's a massive edge over other market participants, but only goes to show that even with that kind of information at your disposal, you are still not guaranteed to make money on every trade. I wish I could find the article. The overlap between "Matt Levine article" and "insider trading" sets is large enough to make any search for a particular piece of news a needle/haystack problem. EDIT: to clarify - when you are trading on inside information with the goal of making a quick buck, you are not interested in how the company will do in short term. You are trying to predict how the market in aggregate will react to that same information, once it becomes public.