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TikTokers Are Trading Stocks by Copying What Members of Congress Do

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Re: TikTokers Are Trading Stocks by Copying What Members of Congress Do

#121

Post by perl4ever »

qwertyuiop_ wrote: post #114
cronix wrote: post #93

Earlier quoted context omitted.

* Nancy Pelosi's husband, Paul Not saying she didn't give him info, but she didn't do the actual trades. He's an investment manager. > Paul Pelosi, investment manager and the husband of House Speaker Nancy Pelosi, purchased up to $11 million worth of mega-cap tech stocks in May and June, according to a financial disclosure form filed last week. https://markets.businessinsider.com/news/stocks/nancy-pelosi...

He has magical superpowers and just happens to be the husband of a policy maker that drives trillions in government spending.

After skimming the link, what is the conflict of interest here?

He benefits if Apple and Amazon go up. So does everybody who owns an S&P 500 fund.

Does this mean that Pelosi has an incentive not to be too harsh in regulating the tech giants? Is that a big problem?

Or was the timing based on an insider's knowledge of when there would be publicity about regulations and when it would die down?

Re: TikTokers Are Trading Stocks by Copying What Members of Congress Do

#122

Post by the_optimist »

jasonwatkinspdx wrote: post #119
qwertyuiop_ wrote: post #114

Earlier quoted context omitted.

He has magical superpowers and just happens to be the husband of a policy maker that drives trillions in government spending.

Roughly 9 out of 10 hedge funds fail to beat the market or simple passive strategies indexed to it. I'm no fan of Pelosi personally, but observing her husbands performance isn't smoking gun evidence, it's just banal. Also, consider that a lot of what hedge funds offer is bespoke risk profiles to high net wealth individuals that are overexposed to particular market sectors.

This is wrong on all levels. Banality and evidence don’t sit across a spectrum. Hedge funds largely don’t offer sector exposure for balancing purposes in the general, and neither in this specific case. Paul Pelosi runs a diversified investment portfolio, not a hedge fund.

Re: TikTokers Are Trading Stocks by Copying What Members of Congress Do

#123

Post by Galanwe »

bo1024 wrote: post #117
duedillyio wrote: post #112

This is a bit like a popular hedge fund strategy known as alpha capture. In the alpha capture strategy, funds look at the buy/sell recommendations made by analysts (for example those at the major banks). Applying a systematic approach means that they can measure the accuracy of each individual analyst and choose whether or not to follow along by trading the advice from that person. The best analysts eventually get hi…

I think the most interesting question is how you can tell if someone is actually good vs fluctuations due to luck. I'd think it takes a long time to get statistical significance. Or, during a bull run the optimistic traders all look great for a while, but this later proves illusory.

You just summarized the main problem of quantitative finance: you need points to assert statistical significance. And thus why data providers with long history are paid so much.

Re: TikTokers Are Trading Stocks by Copying What Members of Congress Do

#124

Post by duedillyio »

bo1024 wrote: post #117
duedillyio wrote: post #112

This is a bit like a popular hedge fund strategy known as alpha capture. In the alpha capture strategy, funds look at the buy/sell recommendations made by analysts (for example those at the major banks). Applying a systematic approach means that they can measure the accuracy of each individual analyst and choose whether or not to follow along by trading the advice from that person. The best analysts eventually get hi…

I think the most interesting question is how you can tell if someone is actually good vs fluctuations due to luck. I'd think it takes a long time to get statistical significance. Or, during a bull run the optimistic traders all look great for a while, but this later proves illusory.

Truly. There's some standard approaches like beta-adjusting that can be done to put things on equal footing in different market regimes but it's only one part of what determines a stock's performance.

Testing for the significance of someone's average returns for example often can be rules of thumb. For example, given a return stream of a trading strategy, the Sharpe ratio (mean return/vol) is directly related to the t-stat of the mean return being different than 0 (mean ret / (vol/sqrt(n)). Several simplifying assumptions must be made about the distributions of returns that don't line up with reality to do the above but it's mostly a heuristic that will let you say "ah, the Sharpe is X over the last 5 years? That's significantly different enough than 0 for it to be tradeable."

Re: TikTokers Are Trading Stocks by Copying What Members of Congress Do

#125

Post by [deleted] »

OJFord wrote: post #104
kregasaurusrex wrote: post #94

Front-running is nothing new, this is simply a game of follow-the-leader where copying a group's investment strategy is done until larger players learn to frontrun or adversarially trade against the aforementioned frontrunners entering in. For example, a scanner may pick up an SEC filing published at 4:01 PM saying that the CEO, CFO, and CIO all purchased shares in their company, and traders would buy shares aftermar…

If you want to label it, it's more 'pump and dump' than front-running isn't it? I understand the latter to be broker (or whoever) trading with knowledge of, ahead of in time, in front of, other orders? I.e. exactly the opposite of 'follow-the-leader'

[deleted]

Re: TikTokers Are Trading Stocks by Copying What Members of Congress Do

#126

Post by Consultant32452 »

perl4ever wrote: post #121
qwertyuiop_ wrote: post #114

Earlier quoted context omitted.

He has magical superpowers and just happens to be the husband of a policy maker that drives trillions in government spending.

After skimming the link, what is the conflict of interest here? He benefits if Apple and Amazon go up. So does everybody who owns an S&P 500 fund. Does this mean that Pelosi has an incentive not to be too harsh in regulating the tech giants? Is that a big problem? Or was the timing based on an insider's knowledge of when there would be publicity about regulations and when it would die down?

Stocks confer ownership. Is she spending government money at a company that she is a partial owner of?

Re: TikTokers Are Trading Stocks by Copying What Members of Congress Do

#127

Post by Galanwe »

DevKoala wrote: post #86
bko wrote: post #80

Earlier quoted context omitted.

This is also unlikely to work because Congress members don't do particularly well on trading. It's very hard to trade successfully, even with insider information its not entirely obvious what a stock price will do. It seems obvious because news media often reports ad-hoc analysis on a stock price movement. For instance, they'll say "Apple up 5% based on surprising App store revenue growth", but if it were to drop you…

Ehh, Nancy Pelosi beats most hedge fund managers consistently year over year. https://unusualwhales.com/i_am_the_senate/pelosi

Returns alone mean nothing to evaluate an investment strategy against an other. At the _very_ least you would need to compare with the same level of volatility.

Re: TikTokers Are Trading Stocks by Copying What Members of Congress Do

#128

Post by kesselvon »

DevKoala wrote: post #86
bko wrote: post #80

Earlier quoted context omitted.

This is also unlikely to work because Congress members don't do particularly well on trading. It's very hard to trade successfully, even with insider information its not entirely obvious what a stock price will do. It seems obvious because news media often reports ad-hoc analysis on a stock price movement. For instance, they'll say "Apple up 5% based on surprising App store revenue growth", but if it were to drop you…

Ehh, Nancy Pelosi beats most hedge fund managers consistently year over year. https://unusualwhales.com/i_am_the_senate/pelosi

Yeah, most hedge fund managers are also absolute trash though.

Re: TikTokers Are Trading Stocks by Copying What Members of Congress Do

#129

Post by known »

not2b wrote: post #21

This is unlikely to work because of the timing delay. Suppose a member of Congress has access to inside information and trades on it. They have 45 days to disclose the trade. By the time the trade is disclosed, the market has already moved: if Pelosi or McConnell or whoever bought low so they could sell high, a month later the increase is probably already baked in.

I haven't seen Congress members doing https://en.wikipedia.org/wiki/Short_(finance)

Re: TikTokers Are Trading Stocks by Copying What Members of Congress Do

#130

Post by perl4ever »

Consultant32452 wrote: post #126
perl4ever wrote: post #121

Earlier quoted context omitted.

After skimming the link, what is the conflict of interest here? He benefits if Apple and Amazon go up. So does everybody who owns an S&P 500 fund. Does this mean that Pelosi has an incentive not to be too harsh in regulating the tech giants? Is that a big problem? Or was the timing based on an insider's knowledge of when there would be publicity about regulations and when it would die down?

Stocks confer ownership. Is she spending government money at a company that she is a partial owner of?

Would that be an issue if it was owned through an S&P 500 fund?

I would agree that options look suspicious, even if they are not "short dated out of the money" types.

But mega cap stocks are lot harder to manipulate than some tiny obscure company.

I think I read that Barack Obama put all his savings into government bonds while he was in office, which is admirable and maybe it would be good to mandate high level people all do that.

But if we don't have such a law, it doesn't seem too far out if they own the same big companies that almost everyone who invests in the stock market does.

Before accusing Mr. Pelosi, at a minimum, I think it would be relevant to check how much different his investment returns were from an index of the entire stock market.

I think there have been Republicans that were overzealously accused of insider trading during the beginning of the pandemic too. I forget who, but there was a fuss made about several of them and Matthew Levine dissected some of the claims in his column and didn't think there was much there.

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