Hedge funds use satellite images to beat Wall Street • Hacker News Board

Re: Hedge funds use satellite images to beat Wall Street

#111

Post by harryh » Fri, Jun 21, 2019, 5:57 PM UTC

elliekelly wrote: post #104

harryh wrote: post #12

This article is very wrong to confuse "material non-public information" with hard to acquire information like counting cars in satellite photos. Remember the Matt Levine test: insider trading is about theft, not fairness. When a company insider uses private company information to trade (or colludes with an outside party to do so) they are stealing material non-public information from the company for their own benefit…

Which part of the article do you think confuses MNPI with alternative data? It seemed that the purpose of the paper is to point out how the line between “public” information and “non-public” information is blurring for those who can afford access. And given how difficult it is to define insider trading that seems like a pretty accurate assessment to me. Alternative data firms are the new expert network firms in the w…

The line is not blurring. Non-public information is information owned by the company. This is different from information that is hard to acquire and hence, not available to everyone.

You are making the same mistake the article does when you state this line is blurring.

Re: Hedge funds use satellite images to beat Wall Street

#112

Post by whymsicalburito » Fri, Jun 21, 2019, 5:58 PM UTC

sib wrote: post #79

Something that is visible from space - the number of cars in a parking lot - seems to be the very antithesis of "non-public" information. I think Berkeley missed the thread on this one.

Yes, but it's not like the cars are ONLY visible from space. You are welcome to organize a large group of people to travel around to parking lots and count cars and then privately share your findings. What the funds are doing is just a more efficient version of that. It's all public information.

Re: Hedge funds use satellite images to beat Wall Street

#113

Post by solatic » Fri, Jun 21, 2019, 5:58 PM UTC

lolc wrote: post #15

I find it somewhat interesting to what lengths traders go for profits. Cue people who explain how this makes the markets more efficient. Something I'm wondering about though: The article makes it sound like this is some new unfair advantage of the big traders. But isn't this an old game? If you can afford to acquire and process the data you're likely going to beat the other participants. That was always true. I don't…

It's a good thing for markets to reward information-gathering. Truth is a valuable commodity for the public. For every current investor who will lose money when the truth is revealed, there are many more prospective investors who will be protected from investing in a losing proposition.

The alternative is a Soviet-style disconnection from reality. A market planner in a far-away office planned for a farm to produce some amount of output, so, that's how much the farm officially put out, nevermind that there was a drought and part of the output was diverted to the black market etc. But how is the planner supposed to know? Without feedback, without the truth, it becomes impossible to come up with accurate numbers for anything. Without the truth, the economy is a house of cards.

Re: Hedge funds use satellite images to beat Wall Street

#114

Post by aswanson » Fri, Jun 21, 2019, 5:58 PM UTC

sokoloff wrote: post #108

aswanson wrote: post #80

Earlier quoted context omitted.

Right. Even Jim Simons of Renaissance Technologies, has publicly stated that their edge is small. They amplify it with leverage, like all funds do.

Though I have a great amount of respect for them, I'll point out that Jim Simons may have multiple motivations to downplay the size of any edge that RenTech has over the averages.

Obviously, but he stated it indirectly; the way he said it was as an aside. But you're right re: his motivations.

Re: Hedge funds use satellite images to beat Wall Street

#115

Post by rz2k » Fri, Jun 21, 2019, 6:00 PM UTC

davidw wrote: post #49

vostok wrote: post #29

Earlier quoted context omitted.

This is exactly right. If you're upset about this then you should be upset that hedge funds can afford to hire smarter analysts than you, which is just silly.

I agree, but where's this end up? Why would retail investors play a game where they're almost certain to lose?

Presumably, there are multiple sophisticated investors competing with each other, and all of their bets affect the market price. There shouldn't be a replicable strategy for beating everyone else if the market is large enough.

If there is a distribution of skill in investors, using mutual funds might prevent you from being in the lower percentiles of under-performing investors. However if you really have a strategy that involves taking the market price that manages to consistently under-perform, then you could make money off of that strategy too.

Re: Hedge funds use satellite images to beat Wall Street

#116

Post by sokoloff » Fri, Jun 21, 2019, 6:02 PM UTC

mochomocha wrote: post #99

ThrustVectoring wrote: post #66

Earlier quoted context omitted.

Some information has material amounts of actual dollar value. Whoever knows that your employer has an acquisition in the works that will be announced tomorrow has an extraordinarily easy way to monetize that. This information rightfully belongs to your employer, who is keeping it under wraps for financially important business reasons. Sharing it or acting on it means enriching yourself at the expense of those busines…

I know that. I'm asking specifically about the semantics of "theft" vs "fairness" here. I don't think the word "theft" makes much sense in this context.

I think the theft angle here is analogous to the theft angle in piracy of digital content.

When I take information entrusted to me by my company and use that information to profit in the market, I have taken information, used it in a manner not authorized, and profited.

That's different from someone else unaffiliated with the company independently deriving the information, using it in the market, and profiting.

As an example, the researchers who discovered VW's cheating on diesel emissions tests (assuming they were independent) would be perfectly within their rights to short or buy puts on Volkswagen. VW executives who were responding to the EPA inquiry or otherwise discovered the cheating would not be within their rights. In both cases, there was a moment where that information was material to the valuation of VW and not public, yet one group could legally trade on it and another could not.

Re: Hedge funds use satellite images to beat Wall Street

#117

Post by waterside81 » Fri, Jun 21, 2019, 6:02 PM UTC

shanty wrote: post #94

waterside81 wrote: post #14

There's a whole marketplace where companies with so-called "Alternative-data" sell their datasets to quant traders. Satellite imagery of farms, passenger traffic through airports, all sorts of random, seemingly disparate data.

Is there a service or company that lists this data? I'm curious about what types of data are available.

Yeah check out Eagle Alpha https://eaglealpha.com/

Re: Hedge funds use satellite images to beat Wall Street

#118

Post by ebiester » Fri, Jun 21, 2019, 6:02 PM UTC

rolltiide wrote: post #98

davidw wrote: post #65

Earlier quoted context omitted.

That's what I've done, but I still idly (this is not really in the top 100 things I'm concerned about right now) wonder where this ends up if things sort themselves out so much.

If this discussion is still narrowly tailored to the securities market, since this discussion was also about "insider trading", which is a unique prohibition to the securities market and not any other capital market then: Retail has no business in the securities market. thats where it ends up. stop playing. retail investors flocking to the stock market is a 40 year old meme that is built upon non-objective thought an…

Laziness?

It's built on desperation.

There were some solid ways to develop retirement strategies with lifelong careers, pensions, and other older retirement vehicles. However, pensions are largely irrelevant outside the public sector now, the older retirement vehicles have stagnated/become poor investments (like annuities, which have become a landmine for terrible fees), and what was left was 401ks and individual retail stocks.

Mutual funds are a similar landmine, where transparency is lost and they're often built for the tax particularities of retirement accounts.

That leaves retail and... ETFs, which we can only wait for someone to find an angle to extract more value at the expense of small investors' returns.

Re: Hedge funds use satellite images to beat Wall Street

#119

Post by lil-scamp » Fri, Jun 21, 2019, 6:03 PM UTC

This example of counting cars has been around the geo industry forever, and satellite imagery is pretty cost prohibitive to get on a regular basis. I'd be surprised if hedge funds haven't already moved on to purchasing location-based data (ie mobile phone data) to get even more accurate counts of people in box stores.

Re: Hedge funds use satellite images to beat Wall Street

#120

Post by elliekelly » Fri, Jun 21, 2019, 6:06 PM UTC

harryh wrote: post #111

elliekelly wrote: post #104

Earlier quoted context omitted.

Which part of the article do you think confuses MNPI with alternative data? It seemed that the purpose of the paper is to point out how the line between “public” information and “non-public” information is blurring for those who can afford access. And given how difficult it is to define insider trading that seems like a pretty accurate assessment to me. Alternative data firms are the new expert network firms in the w…

The line is not blurring. Non-public information is information owned by the company. This is different from information that is hard to acquire and hence, not available to everyone. You are making the same mistake the article does when you state this line is blurring.

> The line is not blurring. Non-public information is information owned by the company. This is different from information that is hard to acquire and hence, not available to everyone.

I didn’t realize it was so cut and dry. How silly of me! I guess all of the work I’ve done providing legal advice to hedge funds on what is and isn’t insider trading since Preet Bahara first came to town was for nothing. Thanks for clearing that up.