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Perplexity AI's new tool for researching the stock market

zdnet.com

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Re: Perplexity AI's new tool for researching the stock market

#31

Post by plaidfuji »

Maxatar wrote: post #30
dom96 wrote: post #19

Earlier quoted context omitted.

If such methodology doesn't exist then how are quantitative trading firms in business? Genuinely wondering. Is this because they have so much money to play with that they can move markets in their favour?

As a quant myself, we don't try to predict the market, at least not the way that people normally talk about predicting, and we certainly don't move the market in our favor. At least what my firm does, is we look at the current state of the market at any given time point, and test whether the current state of the market satisfies our model of an efficient market. If it does, then there's no action to take, if it doesn…

So basically, you’re seeking super low-risk arbitrage opportunities of low-moderate complexity, but like, really high throughput and with really low latency trading?

Re: Perplexity AI's new tool for researching the stock market

#32

Post by airstrike »

drexlspivey wrote: post #20
airstrike wrote: post #2

Speaking as a former M&A financial advisor and valuation nerd, historical financial data is very close to worthless for any valuation work, except perhaps for vaguely connecting the dots to your proprietary, forward looking financial model which is based on a deep understanding of a particular company and industry. This reads to me like garbage in, garbage out... just like 99.9999% of current resources on financial d…

Historical financial data is used for calculating correlations between assets, historical volatility, stress testing, VaR etc. All very useful if you follow any sort of risk management when constructing a portfolio.

That's pretty much just stock prices, not 10-Qs and 10-Ks. And it's already available elsewhere. For those use cases, you need databases and data sources, not LLMs and RAGs.

Re: Perplexity AI's new tool for researching the stock market

#33

Post by airstrike »

sirsinsalot wrote: post #13
airstrike wrote: post #2

Speaking as a former M&A financial advisor and valuation nerd, historical financial data is very close to worthless for any valuation work, except perhaps for vaguely connecting the dots to your proprietary, forward looking financial model which is based on a deep understanding of a particular company and industry. This reads to me like garbage in, garbage out... just like 99.9999% of current resources on financial d…

That's a lot of "this won't work" without very much "here's what does work" leading me to conclude this is bluster and ego. I always hear these finance people dick waving about how crap everyone else's methodologies are without examples of their own. This leads me to conclude it's all snake oil anyway. So I'm asking, speaking as a former M&A financial advisor... What _does_ work?

To be clear, I'm talking about fundamental (relative and intrinsic) valuation, not quant trading.

I recently answered a similar question so if you don't mind I'll just link you to it: https://news.ycombinator.com/item?id=41862295

Re: Perplexity AI's new tool for researching the stock market

#34

Post by FridgeSeal »

sirsinsalot wrote: post #13
airstrike wrote: post #2

Speaking as a former M&A financial advisor and valuation nerd, historical financial data is very close to worthless for any valuation work, except perhaps for vaguely connecting the dots to your proprietary, forward looking financial model which is based on a deep understanding of a particular company and industry. This reads to me like garbage in, garbage out... just like 99.9999% of current resources on financial d…

That's a lot of "this won't work" without very much "here's what does work" leading me to conclude this is bluster and ego. I always hear these finance people dick waving about how crap everyone else's methodologies are without examples of their own. This leads me to conclude it's all snake oil anyway. So I'm asking, speaking as a former M&A financial advisor... What _does_ work?

You think the people with the stuff that even “sort of works” are likely to be giving up that edge?

Re: Perplexity AI's new tool for researching the stock market

#35

Post by FridgeSeal »

jdhwosnhw wrote: post #22
immibis wrote: post #14

Earlier quoted context omitted.

nothing. There is no way to predict the stock market. Even the way you're probably thinking of. Even the ones in the replies to this comment. Even the really basic ones and the really advanced ones.

The existence and success of the Millenium fund is a (probabilistic, to be fair) disproof of your assertion.

Tbf, I’ve had friends in finance describe the Millennium fund (now Medallion fund I think?) as operating in a very, very specific niche of the market. Probably helps that it’s limited to a very select group. Its extraordinary impressive for sure, but I don’t think it is widely applicable or comparable.

Re: Perplexity AI's new tool for researching the stock market

#36

Post by airstrike »

serjester wrote: post #4
airstrike wrote: post #2

Speaking as a former M&A financial advisor and valuation nerd, historical financial data is very close to worthless for any valuation work, except perhaps for vaguely connecting the dots to your proprietary, forward looking financial model which is based on a deep understanding of a particular company and industry. This reads to me like garbage in, garbage out... just like 99.9999% of current resources on financial d…

I don't touch finance, but I'd be curious to have you elaborate on the data sources that a professional does care about.

It depends on whether you're publicly sharing your valuation work or confidentially advising a client about valuation.

The former is what equity research analysts do at major investment banks (like Morgan Stanley, BAML, JP Morgan, etc.) and boutique / middle-market research firms (Stifel, Cantor Fitzgerald, Raymond James, Guggenheim, etc.). Google has led me to this LinkedIn post with a long list of equity research firms which seems accurate and credible after skimming it briefly: https://www.linkedin.com/pulse/most-comprehensive-list-sell-...

The latter is what I used to do as an M&A advisor. Basically the "I want to buy company X, how much should I pay?" or "I may be interested in selling / people are reaching out expressing interest in my company, how much am I worth?" type of scenarios, plus some other more complex but not necessarily more fun things like merger of equals and what have you. In these situations, the analysis tends to be more of a "let's look at it from all angles" which usually gets distilled into a one-page summary nicknamed "football field" showing ranges of values according to various methodologies. Things like DCF, discounted equity value, relative trading multiples (also called "comps"), LBO (also called the "floor valuation") all get featured and are the standard metrics on which an advisor's view is supported.

As an advisor, I never came up with my own projections for valuation, because that would open the door for litigation so it's just not done. Instead, we point to what "the street" is saying, by taking the consensus view (often some filtered average/mean of equity research projections usually provided by Bloomberg, FactSet or Capital IQ for liability reasons, but which may be "handspread" in some situations by actually pulling the specific numbers from the latest available research reports from several analysts and calculating the mean).

I hope that helps answer your question but happy to answer any follow-ups too since I'm always glad to share what I know about the topic

Re: Perplexity AI's new tool for researching the stock market

#38

Post by sebastiennight »

fullshark wrote: post #9
timhigins wrote: post #5

This reads like a sponsored/promoted article. Would be nice to see a disclosure if it is or they get affiliate link revenue

It’s probably the traditional way a glowing article gets written: a reporter repeats something that a PR rep sent to their inbox cause they needed something written to hit a deadline.

This is why good books on PR will always tell you to write your press release like an article, so that a lazy journalist can post it verbatim. (Have gotten this result a couple times from press releases I wrote when I was running my previous company!)

Re: Perplexity AI's new tool for researching the stock market

#39

Post by serjester »

airstrike wrote: post #36
serjester wrote: post #4

Earlier quoted context omitted.

I don't touch finance, but I'd be curious to have you elaborate on the data sources that a professional does care about.

It depends on whether you're publicly sharing your valuation work or confidentially advising a client about valuation. The former is what equity research analysts do at major investment banks (like Morgan Stanley, BAML, JP Morgan, etc.) and boutique / middle-market research firms (Stifel, Cantor Fitzgerald, Raymond James, Guggenheim, etc.). Google has led me to this LinkedIn post with a long list of equity research f…

That’s super helpful - so basically what other deals are going on in the market and how they’re being structured?

Which makes sense - seems like Perplexity will always cater towards your average retail investor, there’s just too much complexity and cost to acquiring the type of data a professional cares about. Seems like that will need a to be its own platform.

Re: Perplexity AI's new tool for researching the stock market

#40

Post by airstrike »

serjester wrote: post #39
airstrike wrote: post #36

Earlier quoted context omitted.

It depends on whether you're publicly sharing your valuation work or confidentially advising a client about valuation. The former is what equity research analysts do at major investment banks (like Morgan Stanley, BAML, JP Morgan, etc.) and boutique / middle-market research firms (Stifel, Cantor Fitzgerald, Raymond James, Guggenheim, etc.). Google has led me to this LinkedIn post with a long list of equity research f…

That’s super helpful - so basically what other deals are going on in the market and how they’re being structured? Which makes sense - seems like Perplexity will always cater towards your average retail investor, there’s just too much complexity and cost to acquiring the type of data a professional cares about. Seems like that will need a to be its own platform.

> That’s super helpful - so basically what other deals are going on in the market and how they’re being structured?

That's one of the rows of the football field. Actually one I forgot to mention, often called "precedent transactions". You can see some examples of these slides if you scroll down to "Why these slides are made" here https://www.alexanderjarvis.com/investment-banking-slide-exa...

But when I mentioned relative valuation or trading comparables, I meant looking at similar public companies today and what their implied valuation is based on their current share price (more about that here https://news.ycombinator.com/item?id=41862295)

Those relative valuation methodologies are different so-called "intrinsic" valuation methodologies like DCF or discounted equity value, which just look at the company you're valuing and do some math "in a vacuum" to get some implied value per share.

> Which makes sense - seems like Perplexity will always cater towards your average retail investor, there’s just too much complexity and cost to acquiring the type of data a professional cares about. Seems like that will need a to be its own platform.

I agree, but there's definitely a lot of room for automation in the professional space. Unfortunately I can only tackle one startup at a time so that's like ~third on my list of revolutionary ideas that I'll get to one day ;-)

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