The Quants Run Wall Street Now • Hacker News Board

Re: The Quants Run Wall Street Now

#161

Post by mortehu » Tue, May 23, 2017, 4:25 AM UTC

nullnilvoid wrote: post #101

zackmorris wrote: post #48

Anyone have hard numbers on if/by how much quants outperform old fashioned techniques like flags and finding stocks that tend to go the opposite direction from the one you're interested in? I don't know the terminology for all this but I know there are limits due to uncertainty so even the best algorithms may not do much better that someone guessing. Do quants do 10% better, 2x better, 10x better? My Dad and I had a…

> I wanted to try day trading myself but they changed the law in 2001 so you had to have $25,000 to trade on margin, so only the wealthy could get twice the gains: https://en.wikipedia.org/wiki/Pattern_day_trader This is how the rich get richer and the poor get poorer. The rich can trade on margin, pay less tax (capital gain tax is lower than even income tax), and have many more other opportunities. The middle class…

The poor can buy SPLX though.

Re: The Quants Run Wall Street Now

#162

Post by bmpafa » Tue, May 23, 2017, 1:53 PM UTC

nialo wrote: post #157

bmpafa wrote: post #123

Earlier quoted context omitted.

I think that, in terms of social value, the point of diminishing returns for market making and liquidity has long since passed, especially wrt social value for Avg. Joes & Janes. I def. don't hold Facebook etc in a much higher regard here, but if we're talking about brain drain from socially useful fields, I don't think anyone can credibly argue that finance (esp. HFT et al) provides any meaningful social value. In f…

This is somewhat self correcting. HFT firms are make money by taking a spread, which is effectively the cost of making a single trade. As they compete and get better and better at there jobs, this spread well be reduced, the amount of money available to pay for the best and brightest programmers will come down, and they'll suck fewer of them away from other parts of the economy. The point being, the further they go p…

That's a good point, but would that happen quickly enough to undo whatever brain drain problems the industry creates?

Nearly all hedge funds still take 2/20 for example, and their returns have been questionable for a decade, so idk we have reason to have faith in high finance's ability to self correct.

Re: The Quants Run Wall Street Now

#163

Post by xapata » Wed, May 24, 2017, 8:16 PM UTC

nullnilvoid wrote: post #160

xapata wrote: post #159

Earlier quoted context omitted.

Oh boy. Your criticism is that I overestimate wages and your counter-example is a $10,000 investment? "Nearly half of Americans would have trouble finding $400 to pay for an emergency" ( https://www.theatlantic.com/magazine/archive/2016/05/my-secr... ). How are these sub-$100 per day folks going to scrape together $10,000 for investing?

Anywhere below $25,000 does not get the opportunity to use the margin. $10,000 is still far from hoop. $100 per day will get you $2,500 per month conservatively. For a few months of tight pants, you will be able to save enough for $10,00-. You are missing the point here. It is about the principle. Everybody is created equal and should get equal opportunities (at least in terms of law).

I agree with the principle of equal opportunity, but I disagree with the implementation. Providing the "opportunity" to buy stocks on margin to people with less than $25k in their accounts is more like selling cigarettes than selling education.

Just today I noticed a sign posted in the window of my corner store, "Customers of [convenience] store won $1,490,823 from [state] lottery in 2016!" I wish it were required to post the total paid as well. It'd be much better for the public if the sign read, "People in your neighborhood paid $3 million to the state lottery and only won $1 million back."

Similarly, if the brokerage is going to offer margin accounts, they should post easy to understand statistics on how much customers earn and spend. A nice histogram showing returns with sliders to select a bucket for initial amounts invested and proportion bought on margin.

Enforcing free information access is another way that governments can help provide equal opportunity.

Re: The Quants Run Wall Street Now

#164

Post by xapata » Wed, May 24, 2017, 8:19 PM UTC

canoebuilder wrote: post #124

xapata wrote: post #111

Earlier quoted context omitted.

Averages are nearly meaningless without standard deviation or at least a histogram.

Meaningless for telling us the distribution of returns across all hedge funds.(It is very likely a Pareto distribution with, or even more skewed, with a small percentage of funds making the majority of returns.) Interestingly, what these averages do tell us is that the average hedge fund return is not much, if at all, better than the average index fund return, with the index fund return graph being much more uniform…

And without knowing the distribution, we have no idea whether the difference in quant funds vs non-quant funds is distinguishable from zero. Whenever someone tells you the difference between two averages and nothing more, you should assume they are "lying" with statistics.

Re: The Quants Run Wall Street Now

#165

Post by pmart123 » Thu, May 25, 2017, 12:52 PM UTC

yourapostasy wrote: post #125

dsacco wrote: post #81

Earlier quoted context omitted.

There are a few reasons. 1. Almost all buyers are institutional funds or individuals with the means to trade as well-informed investors. To put it succinctly, they're in it as serious business, because it's incredibly expensive. They have no incentive to make the edge they just purchased for five - six figures public. 2. These vendors go to various lengths to protect the data, including steganographic "trap streets"…

Sorry, I should have clarified my question. Why aren't the exchanges themselves publishing the data onto torrents? My layman's understanding is the more actors that participate on the exchanges, the more volume, the more the exchanges profit. If this is true, then making the historical trading data would encourage more entrants onto the exchanges, and the exchanges would earn far more than selling the data to a few l…

Actually, Nasdaq makes more money on licensing its data than on the rest of its businesses. You can go to each exchange and buy the historical data directly. Generally, this is better for backdating depth of book data than say a Bloomberg in my experience but requires a lot more upfront work (parsing, normalizing). Additionally, any non-hft trader that handles institutional trading needs to pay a small fee (roughly $20/month per exchange) in each system that requires real-time data. Also, little-known fact, no retail trading orders hit the actual exchange. Even institutional investors who are not brokers (like most hedge funds) must execute through a broker/EMS.