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

by jsprogrammer 11y ago

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.
  - kasey_junk 11y ago
    New piece of information A - "Twitter might have got a bid buyout" New piece of information B - "That last story was completely fabricated". I'm not EMH believer but to claim that any version but the strongest (which is known to not apply) was implicated by this story is just misrepresenting what the EMH says.
    - jsprogrammer 11y ago
      A (which is arguably not real information) occurred simultaneously with B (actually, I might argue B occurred before A) as the fact that the story was fabricated was evident in the previously unknown and unauthenticated URL which was used to retrieve the "information".
      - kasey_junk 11y ago
        The fact that the information is not real is immaterial to the EMH in any of its forms. The strongest form (which is not applicable here) would indicate that the price jump shouldn't have happened if it was real the people who knew about that information first, could use it to make money and thereby naturally adjust the price of the equity so that there was no "jump". Given that the strong form CANNOT exist in the US equities market, you get situations where new information is allowed to cause price movements as long as it happens quickly and in an unbiased fashion, which this did. Think about it this way, the first piece of information is "Somebody says twitter is being bought out". That is information that should change the price, and that is the headline. "Anyone who says twitter being bought out is full of crap" should also change the price based on the 'reputation' of the people making the statements. Regardless of order those price movements are central to the EMH, not contradictory, and they did in the order we would expect in such a way as to back up the weaker forms of the EMH. So whether you buy the EMH, think even if it exists it doesn't matter, or think it is complete nonsense. This behavior is not evidence to back up your stance. If you think it is, you don't understand the EMH.
        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.
- kasey_junk 11y ago
  New piece of information A - "Twitter might have got a bid buyout" New piece of information B - "That last story was completely fabricated". I'm not EMH believer but to claim that any version but the strongest (which is known to not apply) was implicated by this story is just misrepresenting what the EMH says.
  - jsprogrammer 11y ago
    A (which is arguably not real information) occurred simultaneously with B (actually, I might argue B occurred before A) as the fact that the story was fabricated was evident in the previously unknown and unauthenticated URL which was used to retrieve the "information".
    - kasey_junk 11y ago
      The fact that the information is not real is immaterial to the EMH in any of its forms. The strongest form (which is not applicable here) would indicate that the price jump shouldn't have happened if it was real the people who knew about that information first, could use it to make money and thereby naturally adjust the price of the equity so that there was no "jump". Given that the strong form CANNOT exist in the US equities market, you get situations where new information is allowed to cause price movements as long as it happens quickly and in an unbiased fashion, which this did. Think about it this way, the first piece of information is "Somebody says twitter is being bought out". That is information that should change the price, and that is the headline. "Anyone who says twitter being bought out is full of crap" should also change the price based on the 'reputation' of the people making the statements. Regardless of order those price movements are central to the EMH, not contradictory, and they did in the order we would expect in such a way as to back up the weaker forms of the EMH. So whether you buy the EMH, think even if it exists it doesn't matter, or think it is complete nonsense. This behavior is not evidence to back up your stance. If you think it is, you don't understand the EMH.
      - jsprogrammer 11y ago