6 ms·

Market has already corrected.

by bitwarrior 11y ago

jlgaddis 11y ago
But somebody likely made a lot of money on it.
- 404error 11y ago
  Most likely shorts, they probably saw this spike and knew it was coming back down soon.
  - celticninja 11y ago
    So they would start shorting it once it starts to rise? I thought perhaps someone holding the shares would start to sell at maybe 5% and then buy back in on the way down. But with shorting I guess you don't need the capital outlay of owning the shares in the first place.
    - 404error 11y ago
      Consider the following short-selling example. A trader believes that stock SS which is trading at $50 will decline in price, and therefore borrows 100 shares and sells them. The trader is now “short” 100 shares of SS since he has sold something that he did not own in the first place. The short sale was only made possible by borrowing the shares, which the owner may demand back at some point. A week later, $SS reports dismal financial results for the quarter, and the stock falls to $45. The trader decides to close the short position, and buys 100 shares of SS at $45 on the open market to replace the borrowed shares. The trader’s profit on the short sale – excluding commissions and interest on the margin account – is therefore $500. Copied from: http://www.investopedia.com/terms/s/shortselling.asp#ixzz3ftUrNnyf http://www.investopedia.com/terms/s/shortselling.asp#ixzz3ft...
      - celticninja 11y ago
        My query was really - if you short it in advance wouldn't it require the price falling below it's starting price for you to profit. It seems that this was intended to raise the market price in the short term, therefore only shorting it on the way up would make you profit when shorting. Also it did not fall below the original price when it corrected.
jsprogrammer 11y ago
An all knowing, or at least efficient, market would have rejected obvious spam instead of working itself into a frenzy.
- tedunangst 11y ago
  I don't think the efficient market hypothesis claims that stupid people can't exist.
  - jsprogrammer 11y ago
    The EMH is, as far as I can tell, a tautology. It makes no real claims. The article was an obvious piece of spam/trollmanship. It was easily verifiable as being a fake Bloomberg article, yet some probably believed it was real and made trades at prices higher than what was transacting before the article appeared.
- kasey_junk 11y ago
  Not an expert, but I'm reasonably certain this is evidence in favor of stronger forms of the efficient market hypothesis. New possible information was accounted for in the price effectively immediately, in both directions without bias. We know that the US equities market cannot be an instance of the strongest form of the efficient market, so we certainly shouldn't be surprised that new information causes changes in prices even if we believe that the US equities market follows weaker forms of the efficient-market hypothesis.
  - jsprogrammer 11y ago
    What exactly was the new information here? It was a completely fabricated article made to look like it came from an industry source. The article has no bearing on Twitter, yet the shares traded up 8% immediately after it came out and fell back down as it was realized the article was farce. If any new information was created, it's that whoever is trading Twitter stock (and by extension, most other stocks) trades on false information at least some of the time. My strong hypothesis is that most trades are based on false information most of the time.

Market has already corrected.

jlgaddis 11y ago

But somebody likely made a lot of money on it.

404error 11y ago
Most likely shorts, they probably saw this spike and knew it was coming back down soon.
- celticninja 11y ago
  So they would start shorting it once it starts to rise? I thought perhaps someone holding the shares would start to sell at maybe 5% and then buy back in on the way down. But with shorting I guess you don't need the capital outlay of owning the shares in the first place.
  - 404error 11y ago
    Consider the following short-selling example. A trader believes that stock SS which is trading at $50 will decline in price, and therefore borrows 100 shares and sells them. The trader is now “short” 100 shares of SS since he has sold something that he did not own in the first place. The short sale was only made possible by borrowing the shares, which the owner may demand back at some point. A week later, $SS reports dismal financial results for the quarter, and the stock falls to $45. The trader decides to close the short position, and buys 100 shares of SS at $45 on the open market to replace the borrowed shares. The trader’s profit on the short sale – excluding commissions and interest on the margin account – is therefore $500. Copied from: http://www.investopedia.com/terms/s/shortselling.asp#ixzz3ftUrNnyf http://www.investopedia.com/terms/s/shortselling.asp#ixzz3ft...
    - celticninja 11y ago
      My query was really - if you short it in advance wouldn't it require the price falling below it's starting price for you to profit. It seems that this was intended to raise the market price in the short term, therefore only shorting it on the way up would make you profit when shorting. Also it did not fall below the original price when it corrected.

jsprogrammer 11y ago

An all knowing, or at least efficient, market would have rejected obvious spam instead of working itself into a frenzy.

tedunangst 11y ago
I don't think the efficient market hypothesis claims that stupid people can't exist.
- jsprogrammer 11y ago
  The EMH is, as far as I can tell, a tautology. It makes no real claims. The article was an obvious piece of spam/trollmanship. It was easily verifiable as being a fake Bloomberg article, yet some probably believed it was real and made trades at prices higher than what was transacting before the article appeared.
kasey_junk 11y ago
Not an expert, but I'm reasonably certain this is evidence in favor of stronger forms of the efficient market hypothesis. New possible information was accounted for in the price effectively immediately, in both directions without bias. We know that the US equities market cannot be an instance of the strongest form of the efficient market, so we certainly shouldn't be surprised that new information causes changes in prices even if we believe that the US equities market follows weaker forms of the efficient-market hypothesis.
- jsprogrammer 11y ago
  What exactly was the new information here? It was a completely fabricated article made to look like it came from an industry source. The article has no bearing on Twitter, yet the shares traded up 8% immediately after it came out and fell back down as it was realized the article was farce. If any new information was created, it's that whoever is trading Twitter stock (and by extension, most other stocks) trades on false information at least some of the time. My strong hypothesis is that most trades are based on false information most of the time.