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They Still Haven't Told You

arxiv.org

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Re: They Still Haven't Told You

#41

Post by bloodyplonker22 »

paulpauper wrote: post #32
nixpulvis wrote: post #18

Am I blind or does this paper spend a huge amount of time lamenting the failures to notice the issue, without ever once actually describing the issue. I don't claim to be very knowledgable here, so can someone fill in the gaps for those of us who want to know exactly why Fig 2. is so damning?

I don't think there is anything new here. The overnight trading anomaly has been observed for years

I work on wall st and, trust me, even the greenest traders know this. I think the author is trying overly hard to be dramatic in order to achieve his PhD certificate.

Re: They Still Haven't Told You

#42

Post by paulpauper »

yellow_lead wrote: post #37
bee_rider wrote: post #31

Clickbait paper titles on arxiv, good grief. Out of curiously I looked the guy up -- he must have gotten access via some technical publications ~a decade ago. There ought to be away to cut off access to people who are no longer publishing in their field of expertise.

I thought anyone can publish to arxiv?

no. from what I know, you need two endorsements or have a certain academic credentials.

Re: They Still Haven't Told You

#43

Post by jonathankoren »

pavlov wrote: post #26
Victerius wrote: post #13

Earlier quoted context omitted.

Tangential question: why isn't the stock market open 24/7/365 (minus periodic maintenance of the computer systems)?

Because professionals don’t want to monitor stock prices 24/7, and because the end-of-day price is significant a lot of things. A lot of trading takes place in the last 30 minutes of the day for that reason.

Two words: shift work

Another two words: algorithmic trading

Re: They Still Haven't Told You

#44

Post by vmception »

_2d30 wrote: post #8
ksdale wrote: post #2

Seems to me like an easy explanation is that a whole ton of firms wouldn't want to hold anything overnight because you can't respond to it until the next morning? So they pile in in the morning, and exit in the afternoon.

You clearly didn't read the abstract. There's obviously a conspiracy and if any of this is news to you, it is because the people you trust to alert you to such problems still haven’t told you. Only Bruce knows the truth!!! /s

Bruce should make a newsletter so they can sell some branded mugs

Re: They Still Haven't Told You

#45

Post by posnet »

raws wrote: post #12

People tend to point out how much energy cryptos consume, is there an estimate for how much high frequency trading consumes world wide?

HFT firms use a tiny fraction of the energy of proof of work crypto schemes. Even if you take into account energy requirements they used to build their high speed networks.

The main reason being is that they are all co-located with the exchange, and the byzantine fault tolerance is completely side stepped by the exchange having a single point of serialization between the HFT participants and the matching engine. And then just ensuring everyone has the same length cables to that single point of serialization.

So the policy of everyone connects through this single point, solves the fairness problem.

And then the fault tolerance is often just solved by having an active standby architecture, so if the primary matching engine goes down, you fail over to the backup.

You would be surprised at the low number of servers actually in the primary path for financial exchanges.

Re: They Still Haven't Told You

#46

Post by antisthenes »

nixpulvis wrote: post #18

Am I blind or does this paper spend a huge amount of time lamenting the failures to notice the issue, without ever once actually describing the issue. I don't claim to be very knowledgable here, so can someone fill in the gaps for those of us who want to know exactly why Fig 2. is so damning?

"They still haven't told you and I'm not going to either" should have been the correct name for the paper.

Re: They Still Haven't Told You

#47

Post by Centigonal »

This is a really poor use of the arXiv.

Here's a discussion of the same phenomenon that provides some explanations that aren't "a shadowy trading firm is propping up prices by painting the tape at open":

https://systematicindividualinvestor.com/2021/01/15/the-magi...

To be honest, the author's strategy could really be happening: some market player (or players) may be aggressively buying up stocks at open and selling them throughout the day at a loss so that the overnight gains positively impact their much larger buy-and-hold tranche of the same stocks. So what? Not only would they be taking on a risk premium by holding that larger slice of stocks overnight, but they're also opening themselves up to massive tail risk. A strategy like this works by taking advantage of the change in order book depth throughout the day to pump up P/Es. P/Es will eventually come back down. When that happens, who knows whether the crash'll start during a trading session or overnight. It reduces into a market timing strategy. This "paper" is ridiculous.

Re: They Still Haven't Told You

#49

Post by ksdale »

ebe1e95d8942 wrote: post #15
ksdale wrote: post #2

Seems to me like an easy explanation is that a whole ton of firms wouldn't want to hold anything overnight because you can't respond to it until the next morning? So they pile in in the morning, and exit in the afternoon.

but this article is explaining that unless you are selling short in the morning and covering at night, there are mostly negative returns for intraday trading, i.e. "pil(ing) in in the morning, and exit(ing) in the afternoon". There are lots of firms and funds and floors that never hold overnight, but this research demonstrates that that is basically a statistically losing strategy. If you follow markets it's almost i…

I think the issue with this is that one person's loss is another person's gain. Lots of people lose money during the day, but it's not generally the very sophisticated hedge funds and HFT people.

And if you were to hold overnight, you'd have to sell in the morning, and the volume of overnight trading isn't high enough to support a bunch of big firms buying into overnight trading and selling at open, they'd all sell into a disaster, which would make overnight returns go away?

Re: They Still Haven't Told You

#50

Post by posnet »

paulpauper wrote: post #24
Victerius wrote: post #7

> one or more large, long-lived quant firms tending to expand its portfolio early in the day (when its trading moves prices more) and contract its portfolio later in the day (when its trading moves prices less), losing money on its daily round-trip trades to create mark-to-market gains on its large existing book. Renaissance Technologies' Medallion Fund? Simons is a genius.

I am surprised that by now, decades later, no one has the goods on Renaissance . What is to stop someone who works there or former employee from uploading to the dark web the "Renaissance strategy", for a price tag of $10-100 million btc, monero or something. Who would know. Although no one would beleive him.

Well one of the big factors was tax avoidance. Basically mislabel your long term strategy as short term for a lower tax bill. Then just wait, and know that the final penalty fine (while still large) will still be less than the total you made over time by not paying the tax.

https://www.reuters.com/business/finance/renaissance-executi...

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