Comment by crazygringo | Hacker News Reader

Comment by crazygringo | Hacker News Reader

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Alpha is ultimately the result of analysis, of better analysis than others.

LLM's can actually be exceptionally good at research and pattern recognition, i.e. analysis. And while they aren't great at running numbers themselves, they can do exceptional work passing off Python scripts to an interpreter to generate the numerical results they need.

I'm quite sure the Robinhood AI is going to be trash, i.e. just a gimmick.

But, it's not crazy to think that with the right harness, there are big opportunities for identifying profitable strategies. Especially relying on unparalleled and essentially unlimited research capacity based on public information. More analysis than any single firm could ever hire.

And even for Robinhood users, it's entirely plausible that AI-traded stocks will perform much better than the trades a majority of users would make, since most investors are really unsophisticated.

>LLM's can actually be exceptionally good at research and pattern recognition, i.e. analysis.

No they aren't, they're good at imitating analysis based on representations of analysis in their training data. Also, Its likely that out dated techniques would over represented in training data.

Do you think Jane Street would have the returns they do if they just imitated all their competitors and everyone was using the same strategies?

This is essentially what AlphaZero is doing: https://nof1.ai/

Heh if you look at the Sharpe Ratios of the strategies/models, they're all terrible. The best performing regime there is still a Sharpe of 0.019

Yeah it looks like what uneducated retail traders would find interesting.

> LLM's can actually be exceptionally good at research and pattern recognition, i.e. analysis.

Sure but knowing where to start research is also a problem. Just saying “do research” isn’t going to work even with volumes of public information.

Well said. Lots miss this key point and it’s what I mean by alpha. Where to start, what the angle is, and LLM can help develop though I would of course argue it’s a fools errand with how crowded the space is but you could still develop an idea but it’s not going to create the idea for you.

Yeah if you have an actual really good idea for a certain kind of under analyzed data that could give you an edge but it would take too much effort or time to compile or analyze the data, an LLM has potential to make a viable strategy out of an otherwise correct but unuseful insight

I mean sure an LLM can indeed have useful ML functions BUT it is a fools errand to think an LLM at the retail level is generating any alpha. Help build a model sure. Whatever these weird mechanism of agents trading, no.

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