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    #16
    I don't think machines will ever be able to accurately predict the future of the market. Too much human behavior involved.

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      #17
      Originally posted by corn18 View Post
      I don't think machines will ever be able to accurately predict the future of the market. Too much human behavior involved.
      Corn - part of me hopes you're right. That said, I see AI making such inroads into the rest of the economy that it may soon be the case that companies which aren't using machines to help investing decisions may be left behind.
      james.c.hendrickson@gmail.com
      202.468.6043

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        #18
        The problem with predicting future market returns accurately is that everyone will know about it and the period of price discovery will be short lived. Once one computer finds out about the future, they all will and the advantage will be lost. The reason the stock market always goes up in the long run is that the underlying companies grow. The reason the market bobbles up and down (sometimes a lot) is all the yahoos thinking they know something someone else doesn't. In the end, the short term trading is a zero sum game (someone has to sell the stock you just bought or vice versa). In the long run, earnings are what drive growth. It really isn't anymore complicated than that. If everyone would just leave well enough alone, we could all just enjoy a 7% return YoY based on the underlying growth of the companies without all the huge deviations. But the $30B+ financial companies would no longer be needed and they aren't about to let that happen.

        Now what if computers could tell us that the market will drop 50% next Thursday? What do you think will happen? Everyone will sell and the market will drop 50% this Thursday. A self fulfilling prophecy. Eventually, the market will discover the folly of predicting the future and settle back into its old ways.
        Last edited by corn18; 09-11-2018, 09:44 AM.

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          #19
          Heh - the old 'efficient market' hypothesis.

          Actually, I just learned a couple of weeks ago that there are different forms of the hypothesis. From wikipedia.

          There are three variants of the hypothesis: "weak", "semi-strong", and "strong" form. The weak form of the EMH claims that prices on traded assets (e.g., stock, bonds or property) already reflect all past publicly available information. The semi-strong form of the EMH claims both that prices reflect all publicly available information and that prices instantly change to reflect new public information. The strong form of the EMH additionally claims that prices instantly reflect even hidden "insider" information.

          The problem is - its hard to test how efficient markets really are. So nobody really knows if in fact markets would account for the impact of AI prediction or not. Personally, I think the investing public (present company not included) prefers safer passive investments - they would prefer to invest in an index fund and just call it good.
          james.c.hendrickson@gmail.com
          202.468.6043

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            #20
            Originally posted by james.hendrickson View Post
            Heh - the old 'efficient market' hypothesis.

            Actually, I just learned a couple of weeks ago that there are different forms of the hypothesis. From wikipedia.

            There are three variants of the hypothesis: "weak", "semi-strong", and "strong" form. The weak form of the EMH claims that prices on traded assets (e.g., stock, bonds or property) already reflect all past publicly available information. The semi-strong form of the EMH claims both that prices reflect all publicly available information and that prices instantly change to reflect new public information. The strong form of the EMH additionally claims that prices instantly reflect even hidden "insider" information.

            The problem is - its hard to test how efficient markets really are. So nobody really knows if in fact markets would account for the impact of AI prediction or not. Personally, I think the investing public (present company not included) prefers safer passive investments - they would prefer to invest in an index fund and just call it good.
            I think the majority of retail investors don't have a clue what to do so they pay someone to do it for them. And those managers love to churn to generate fees.

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