4 ms·

huh? that sounds like ideology and not empirical observation.

• bofadeez 6mo ago
  That's just how limit order books work with mark-to-market pricing
  • xrisk 6mo ago
    Could you point me towards some resource that would help me understand what you wrote? Genuinely curious about how this stuff works
    • eru 6mo ago
      https://en.wikipedia.org/wiki/Efficient-market_hypothesis https://en.wikipedia.org/wiki/Efficient-market_hypothesis might be a good start.
      • bofadeez 6mo ago
        Step 2: https://en.wikipedia.org/wiki/Grossman%E2%80%93Stiglitz_paradox https://en.wikipedia.org/wiki/Grossman%E2%80%93Stiglitz_para...
        • eru 6mo ago
          Yes, but I always found that objection a bit silly. It's like pointing out that real cows are obviously not perfect spheres nor do they live in a vacuum. > [...] if prices perfectly reflected available information, there is no profit to gathering information, in which case there would be little reason to trade and markets would eventually collapse.[2] That's a stupid way to formulate this. Markets wouldn't "collapse". They would get slightly less efficient until equilibrium is restored to where arbitragers can make enough money to keep prices at that level of efficiency.
          • bofadeez 6mo ago
            Maybe not "collapse" in a the sense of going to zero but if there was no profit to trading, then the quant trading industry would not exist, trading profits would collapse. Meanwhile Two Sigma is hiring alpha quants to be AI research scientists at $250k starting salary + bonuses. Even if we're just talking about the HFT/sell-side, there clearly exist various anomalous inefficiencies that can be exploited. Fama's guy doesn't agree either [1] https://www.ft.com/content/813b3d76-6ef1-427d-a2e0-76540f58a510 https://www.ft.com/content/813b3d76-6ef1-427d-a2e0-76540f58a...
            • eru 6mo ago
              As I said, if we woke up this morning and prices were magically efficient in an idealised sense, at most a few quants would go home and retire early, and tomorrow we'd be back at the level (in-) efficiency that allows people to be market makers.
              • bofadeez 6mo ago
                How can prices reflect all available information if there's no profit to collecting the information and there are no informed quant traders? Who is collecting the information exactly so that prices can reflect it and what is their incentive for doing so? Efficiency doesn't happen magically or automatically - traders create it. It's like a kaggle contest* to process information, with the incentive being profit. You don't believe in the existence of residual return orthogonal to priced cross sectional risk factors (alpha)? E.g. Trends, momentum, volatility clustering, etc. many easily demonstrable inefficiencies. VPIN and order flow toxicity are highly predictive features. Most HFT MM especially in crypto involves hybrid alpha in addition to the (visible) bid-ask spread, which it itself an "inefficiency" to compensate market makers like Jane Street and other successful firms that operate on the assumption that weak form EMH is not accurate. * https://www.kaggle.com/competitions/jane-street-real-time-market-data-forecasting https://www.kaggle.com/competitions/jane-street-real-time-ma...
                • eru 6mo ago
      • kristopolous 6mo ago
        That's pure ideology and not empirical. There's you know, even a large section there in that article pointing that out
        • eru 6mo ago
          The index fund industry would like to have a word with you.
          • kristopolous 6mo ago
            Take it up with Wikipedia
• thetailrisk 6mo ago
  [dead]