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Comment by 0898 | Hacker News Reader

My favourite part of this article:

"He became interested in the challenge in part because of some quirky moves in Chinese stocks in the wake of the 2016 U.S. presidential election."

"When the result became clear, a listed Chinese company whose name sounds like “Trump Wins Big’’ in Mandarin surged, while a firm that sounds like “Aunt Hillary’’ slumped."

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i had to read that a couple of times to understand the implications, are people really that dumb?

I remember reading about a company's shares rising by like 400% after it added "blockchain" to its name. Rational agents are going to do rational things all over the world /s.

It's completely rational to buy a stock if you think other ppl are going to be irrational and make the price surge.

I have an image of highly rational traders sitting in high pressure meetings coming up with stupid ideas so that they can front-run stupid people.

Sounds like a keynesian stupid contest.

For people who don't know the reference: https://en.wikipedia.org/wiki/Keynesian_beauty_contest

What if you think everyone else is rational, but they'll all buy the stock for the same reason as you? It's an entirely rational system that leads to a completely irrational outcome.

Yes, and it's a worldwide phenomena. Embedded in this link is Thaler (A Nobel winner) using such an example as a counterexample to one view of the efficient markets hypothesis: https://ftalphaville.ft.com/2017/10/09/2194613/thaler-the-cu...

tl;dr price for the "CUBA fund" spikes following Obama announcement of normalizing relations, despite the CUBA fund having nothing at all to do with CUBA.

Not going to sign up to read that article, so apologies if this is off base or duplicative of what's in the article.

But, automated sentiment analysis gone wrong maybe? Bots see a bunch of negative things with "cuba" in it on twitter/the news and decide that cuba the fund is in trouble.

The excerpt is from this SSRN preprint, section III: https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2790606

The fund went up not down. That aside, I believe the point is that if a bot goes and does that, it is simply doing what a human told it to do; bots reflect the commands of their human masters in an environment (financial markets) created by and for human endeavors. Hiding behind "bots" is not a way to get insight into mechanics of how markets (mal)function, IMO.

Well sure, but (under my thoery) the humans rationally decided to use automated sentiment analysis, knowing that there is a error rate, but finding that it is low enough that they can make money. This just happened to be one of those errors. And substitute negative sentiment for positive sentiment in my original post to match the direction of stock movement.

Thanks for the direct link!

The efficient markets hypothesis seems Really Fucking Dumb™ to me. Like, trivially nonsense.

The EMH isn't necessarily that every stock is perfectly priced. It's that it's not possible to reliably predict where prices will go next.

But isn't the hypothesis that it's not possible to predict because it's perfectly priced already?

If you see EMH as a general principle: all present information is incorporated in the price and all Sharpe ratios trend to the market Sharpe ratio, it makes more sense.

No one actually believes in strong EMH, that is, it’s impossible to beat the market Sharpe ratio.

What might be called the "homophone superstition" aspect of it is (apparently?) bigger in Chinese culture than in other language cultures, though.

http://www.nautil.us/issue/44/luck/is-the-chinese-language-a...

Not all that surprising. A couple years ago a company called Long Island Ice Tea Corp. changed their name to Long Island Blockchain and their stock shot up 289%.

https://www.bloomberg.com/news/articles/2017-12-21/crypto-cr...

Given some investors mistook penny stock ZOOM Technologies for Zoom video conferencing, yes, they really can be.

https://www.ccn.com/zoom-ipo-stupid-investors-made-unrelated...

Or maybe no one mistook it and they were buying because they thought other people did.

a few folks like to use examples like this (and those in the replies here) as examples of auto-trading, actually.

someone noted that every time the actress anne hathaway trends on twitter, the price of warren buffet's berkshire hathaway goes up.

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