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Hedge Fund Uses Algae to Reap 21% Return

bloomberg.com

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Re: Hedge Fund Uses Algae to Reap 21% Return

#101

Post by icebraining »

ju-st wrote: post #64
platz wrote: post #13

Was disappointed because title is misleading; I had hoped the fund was using actual Algae (i.e. computation in biological medium) to produce market decisions. Instead it is just biologists that are creating algos with their existing machine-learning knowledge. Apparently deep-learning and algae are the same thing.

My first thought was that they ask algae for stock tips like the magic conch shell of Spongebob :( https://www.youtube.com/watch?v=Lu5SJcNp0J0

Or Paul the Octopus: https://en.wikipedia.org/wiki/Paul_the_Octopus

Re: Hedge Fund Uses Algae to Reap 21% Return

#102

Post by pfooti »

platz wrote: post #13

Was disappointed because title is misleading; I had hoped the fund was using actual Algae (i.e. computation in biological medium) to produce market decisions. Instead it is just biologists that are creating algos with their existing machine-learning knowledge. Apparently deep-learning and algae are the same thing.

i came here for the algaerithms, was disappointed.

Re: Hedge Fund Uses Algae to Reap 21% Return

#103

Post by scott_karana »

module0000 wrote: post #97

They are overthinking this... with sufficiently low latency to your exchange, all your "quant"(and I use this term loosely) needs to do is watch the order book. When either side's inside bid/ask is about to crack, you join the opposing side with a market order, and place a stop on the next tick in your direction. This is what 99.99% of consistently profitable quants do. It's boring, unexciting, and VERY profitable. T…

I agree with your general assessment of HFT, but if the article is correct, this fund doesn't fit that mold:

> said Lun, whose computer holds trades for an average of six days

Re: Hedge Fund Uses Algae to Reap 21% Return

#104

Post by gjm11 »

platz wrote: post #13

Was disappointed because title is misleading; I had hoped the fund was using actual Algae (i.e. computation in biological medium) to produce market decisions. Instead it is just biologists that are creating algos with their existing machine-learning knowledge. Apparently deep-learning and algae are the same thing.

Deep-sea learning.

Re: Hedge Fund Uses Algae to Reap 21% Return

#105

Post by patio11 »

module0000 wrote: post #97

They are overthinking this... with sufficiently low latency to your exchange, all your "quant"(and I use this term loosely) needs to do is watch the order book. When either side's inside bid/ask is about to crack, you join the opposing side with a market order, and place a stop on the next tick in your direction. This is what 99.99% of consistently profitable quants do. It's boring, unexciting, and VERY profitable. T…

This is what 99.99% of consistently profitable quants do.

This is entirely incorrect. Quants do not, as a rule, run liquidity providing strategies with market orders. Market orders pay for liquidity; they are the buyers for what HFT is selling.

Re: Hedge Fund Uses Algae to Reap 21% Return

#106

Post by namuol »

scott_karana wrote: post #103
module0000 wrote: post #97

They are overthinking this... with sufficiently low latency to your exchange, all your "quant"(and I use this term loosely) needs to do is watch the order book. When either side's inside bid/ask is about to crack, you join the opposing side with a market order, and place a stop on the next tick in your direction. This is what 99.99% of consistently profitable quants do. It's boring, unexciting, and VERY profitable. T…

I agree with your general assessment of HFT, but if the article is correct, this fund doesn't fit that mold: > said Lun, whose computer holds trades for an average of six days

> an average of

Does this exclude outliers? What's the median duration?

Re: Hedge Fund Uses Algae to Reap 21% Return

#107

Post by random28345 »

xchaotic wrote: post #94
wtfz wrote: post #91

Question for investing people.. say I started a hedge fund, put all the money in vanguard to achieve s&p500 benchmark return, then once a year did an options bet with a roughly 97 percent chance of a 3 percent return and a 3 percent chance of ruin. I do this for 10 years, outperformng the s&p 500 by 3 percent consistently. I have 70 percent odds of not being ruined, and I consistent outperform most hedge funds. I hav…

It's a good strategy, if you can afford not to withdraw from the fund on the year (and for several years after) you 97% bet turns sour - there was an article somewhere, which showed that options on S&P singe the great depression almost a hundred years ago, would have only slightly outperformed the index, due to losing in the bear market.

> It's a good strategy, if you can afford not to withdraw from the fund on the year (and for several years after) you 97% bet turns sour

If the bet turns sour, you close the fund. The idea is that you grow the fund and take your two and twenty while your bets are winning, and you keep your prior years' two and twenty after your fund collapses.

Re: Hedge Fund Uses Algae to Reap 21% Return

#108

Post by jogjayr »

ryandrake wrote: post #83
Bartweiss wrote: post #79

Earlier quoted context omitted.

Hah, that's excellent! I'd never heard of that specific trick, but survivor bias does seem like one of the best ways to fool scam-aware people into trusting you.

I had a b-school class do a similar exercise, in the context of the debate between passively and actively managed funds. Everyone in the class was asked to stand up, pull out a coin and flip it. If you flipped tails you sat down. Then the remaining students flipped again, repeating until there was only one person left standing. At which point the professor "interviewed" the student, asking what her method was and how…

I like the exercise. But from a practical pedagogical standpoint (in the unlikely scenario I ever teach a class probability or survivor bias), what would be a safe point to stop the flipping? 3 students left standing? 2? What if all of the students still standing all flip tails simultaneously?

Re: Hedge Fund Uses Algae to Reap 21% Return

#109

Post by noobermin »

jedberg wrote: post #85
ryandrake wrote: post #83

Earlier quoted context omitted.

I had a b-school class do a similar exercise, in the context of the debate between passively and actively managed funds. Everyone in the class was asked to stand up, pull out a coin and flip it. If you flipped tails you sat down. Then the remaining students flipped again, repeating until there was only one person left standing. At which point the professor "interviewed" the student, asking what her method was and how…

I like this. Unfortunately today, you'd be unlikely to find students with coins!

You flip a coin, have students bet on which side the coin will land.

Re: Hedge Fund Uses Algae to Reap 21% Return

#110

Post by scott_karana »

namuol wrote: post #106
scott_karana wrote: post #103

Earlier quoted context omitted.

I agree with your general assessment of HFT, but if the article is correct, this fund doesn't fit that mold: > said Lun, whose computer holds trades for an average of six days

> an average of Does this exclude outliers? What's the median duration?

Even though "average" is a statistically non-rigorous term, we should be out of the "5-15 second maximum" holding times mentioned by GP by at least one order of magnitude.
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