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Comment by reader5000 | Hacker News Reader

I always wonder what general sort of "algorithms" they use. Neural nets?

This is what most of my research has been. Here's a post from Markenomics that I created some time ago with a lot of links on the algorithms used.

http://www.markenomics.com/item?id=321

Also, the US Patent website has lots of interesting stuff if you are really wanting to dig deep into this stuff.

That site has tons of information. I wonder how come I've never heard of it. Thanks a ton.

Here's an example of what the demigods at RenTec do:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a...

"Volfbeyn said that he was instructed by his superiors to devise a way to 'defraud investors trading through the Portfolio System for Institutional Trading, or POSIT,' an electronic order-matching system operated by Investment Technology Group Inc. Volfbeyn said that he was asked to create an algorithm, or set of computer instructions, to 'reveal information that POSIT intended to keep confidential.'"

Now, you didn't think they used Black-Scholes, did you?! If you did, then: welcome to the real world!

for instance: http://en.wikipedia.org/wiki/Technical_analysis

I am wondering what clueless fools have downvoted you. Technical Analysis is as foolish as Black-Scholes. Maybe moving-averages and Bollinger bands are not algorithms for the HN crowd. Technical Analysis is retarded, but then... so is all that crap they teach at Quantitative Finance courses.

Er, what? Do you have any idea what you're talking about?

Actually, I do. Do you?

I found it strange that a guy got downvoted for suggesting that a hedge fund used technical analysis. I hate TA, but then, I hate Quant Finance, too. Whoever thinks that the smart guys at RenTech and the like use that kiddie Stochastic Calculus taught at MFE programs is living in a state of sin. Period.

Technical analysis is just voodoo. I don't know what you mean by "quant finance" but stat arb is merely played out.

The finance academics borrowed the mathematics from physics and the rigor from mathematics, but they forgot that, at the core, theirs is a social science. If they wanted to borrow anything from physics, they could have borrowed the good habit of comparing their theoretical results with experimental data. In physics, a theory is little more than mental masturbation until it's confronted with experiment. That nicely summarizes the state of contemporary academic finance: mental masturbation. Just because physicists were blessed with the ability to model natural phenomena using mathematics, it does not mean other scientists have such luck.

Have you actually worked in this field? As a quant?

I did. I was unimpressed. I was used to working in fields where theories could be trusted. Finance is a lawless territory. It's fun because problems lack structure and are so hard. It's frustrating because 30 years ago my skills would have allowed me to do something cool, while now the field is saturated and the odds are stacked against you. I moved to greener pastures and never looked back.

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