31–40 of 57 posts
Don't think it's that simple. Example: There's a sudden burst in searches for "Macys". They could have started a huge advertising campaign. Turns out that campaign costed them billions of dollar, and didnt have high ROI.
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An economist and his friend are walking down the street when the friend sees a ten dollar bill on the sidewalk. “Look,” he says, “it’s a ten dollar bill”. “Nonsense,” says the economist. “If that was a ten dollar bill, someone would have picked it up by now.”
I'm (and economists) aren't saying that there are never $10 bills on the sidewalk, just that they don't stay there for long after someone notices them. Stock prices went down on the weekends for decades before someone noticed. But once it was noticed it stopped pretty quickly.
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Lots of people use the Dow precisely because it is a bad indicator. If they don't like the conclusion they get with something better, like the W5000 or the S&P500, they can try it again with the Dow for a "second opinion." The whole methodology is a joke anyway. If you evaluate a huge number of search terms, some of them are going do better than others. So terms that might mean something ("debt") get mixed up with te…
Relevant technical terms: 'look-elsewhere effect' and 'false alarm rate' http://en.wikipedia.org/wiki/Look-elsewhere_effect http://en.wikipedia.org/wiki/False_positive_rate There are more similar considerations. Statisticians have been very busy for the last century or so.
Related: The time Eric Schmidt said "One day we had a conversation where we figured we could just try to predict the stock market, and then we decided it was illegal. So we stopped doing that."
I mean, subject to a variety of risk and regulatory issues, perhaps, and not a core competency, and a variety of other things, but... the fundamental reason for insider-trading laws is to make sure the insiders don't abuse their positions and act against the interests of the company's owners (shareholders) by trading in stock tips instead of building shareholder value. If you get knowledge independently -- like if you sent your analyst out to count the number of cars in a firm's parking lots to estimate hiring/firing -- that's all well and good (and is something that hedge funds actually do.)
Heck, if it works, this sort of thing would be great. Moving the market earlier means fewer people buy and sell companies at the wrong price. That sort of knowledge is worth billions. (Think about it from the perspective of startups: if you could see the future and know whether a company would work out before you even founded it, then you would build only successful companies, and you'd be certain they'd be funded well. This is but a small fraction of that power, but it's still quite meaningful.)
I was thinking of something very similar the other day but in regards to bitcoins. They are very volatile at this stage and whenever they're in the public eye they either seem to increase or decrease in value. Perhaps somebody could perform a study as to a relation between the volume of bitcoin related search terms and it's market value.
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As soon as someone figures out bitcoin derivatives (e.g. options), you'll be able to buy or sell the volatility. More broadly, such a development may also stabilize those price fluctuations.
What is your source for the ole' "derivatives reduce volatility in the spot market" assumption?
Derivatives could also reduce risk for users. For instance: you're a business that accepts bitcoins for payment. But the price of bitcoins can fall by 50% in a day! So you'd better transfer those bitcoins to cash the moment you get them, or you're subject to losing half your cash any day. Something that's too hot to handle like that kind of damages the ability to use it as a medium of exchange, doesn't it? But you could alternatively buy bitcoin currency futures, essentially locking in your current price. So maybe you could hang onto those bitcoins a while and use them to pay people for your referral program or something. (Oh, sure, there's a cost associated with it, but there are costs associated with translating cash back and forth as well. Depending on the price of the derivatives, it might make sense.)
Cool paper, but the fact that a silly keyword like 'color' is so significant without an author explanation makes me question their results. I really wish they dug deeper and explained unintuitive results like that. There may be a bug in their experiment. Also, why would they use the Dow Jones Industrial Average? It is a ridiculously bad average of stock market performance for many reasons. This planet money podcast g…
"Color" is slang for opinion or prediction in finance, e.g. a trader could ask an analyst for some "color" on a company before he goes and buys its stock.
Related: The time Eric Schmidt said "One day we had a conversation where we figured we could just try to predict the stock market, and then we decided it was illegal. So we stopped doing that."
Why would it be illegal? :( I mean, subject to a variety of risk and regulatory issues, perhaps, and not a core competency, and a variety of other things, but... the fundamental reason for insider-trading laws is to make sure the insiders don't abuse their positions and act against the interests of the company's owners (shareholders) by trading in stock tips instead of building shareholder value. If you get knowledge…
Let's say you are not connected to company X, but you have a friend that works there. One day your friend tells you material fact. Now, your friend probably broke a couple of rules, but _you_ cannot control what people tell you and you cannot be held liable for what you hear. However, acting on this information is illegal. Even if you presumably do not use this information, but trade shares of company X before the information you know becomes public, you are in murky waters.
Same with Google. Google cannot control what people search for. However, acting on this information would be illegal, unless they are absolutely sure that information in the search terms is consistent with public knowledge about the company.
Earlier quoted context omitted.
An economist and his friend are walking down the street when the friend sees a ten dollar bill on the sidewalk. “Look,” he says, “it’s a ten dollar bill”. “Nonsense,” says the economist. “If that was a ten dollar bill, someone would have picked it up by now.”
I'm (and economists) aren't saying that there are never $10 bills on the sidewalk, just that they don't stay there for long after someone notices them. Stock prices went down on the weekends for decades before someone noticed. But once it was noticed it stopped pretty quickly.
Earlier quoted context omitted.
I'm (and economists) aren't saying that there are never $10 bills on the sidewalk, just that they don't stay there for long after someone notices them. Stock prices went down on the weekends for decades before someone noticed. But once it was noticed it stopped pretty quickly.
I am just trying to double check to make sure I understood so bear with me. Are you telling me that stock prices systematically went down for decades and no one took this into account to make money? there is hope after all...