Numerai, a hedge fund built by a community of anonymous data scientists • Hacker News Board

Re: Numerai, a hedge fund built by a community of anonymous data scientists

#51

Post by onion2k » Wed, Jun 22, 2016, 5:19 AM UTC

modeless wrote: post #37

So in exchange for giving a hedge fund a stock tip that earns 20% in a month, the guy gets $10k? That sounds like a ripoff to me! If you have the skills to do that repeatedly you can make a whole lot more than $10k doing the trades yourself.

The point is that you probably can't do it repeatedly, or predict with any confidence that you can even do it once. Numerai enables you to bet using someone else's money, with a vastly reduced reward, but no risk to you.

Numerai won this time (hence the PR piece) but I don't think we should judge their performance on one action in isolation. We should judge whether their approach works based on a year or two of trading on these predictions. Maybe longer, if reacting to unusual events (economic collapse, freak speculation on tulips, etc) is something you care about.

Re: Numerai, a hedge fund built by a community of anonymous data scientists

#52

Post by vostok » Wed, Jun 22, 2016, 5:22 AM UTC

s_q_b wrote: post #47

vostok wrote: post #43

Earlier quoted context omitted.

To provide a counterexample, P/NP was doing quantitative trading before RenTech. I will say that I wouldn't comment on implementation details in this industry unless I've worked at the company in question.

That's fair. It was not my intention to provide a comprehensive review of the firm's approach, but rather a quick summary that glosses over a great many details. To address your second point, I wouldn't comment on implementation details in a company for whom I had worked. P/NP is Princeton Newport Partners. I have a passing familiarity with that story ;)

I agree. I wouldn't do that either.

Re: Numerai, a hedge fund built by a community of anonymous data scientists

#53

Post by flashman » Wed, Jun 22, 2016, 5:35 AM UTC

iopuy wrote: post #31

karmacondon wrote: post #30

Earlier quoted context omitted.

I don't think this is true at all. 10,000 people are just going to have more ideas and better individual ideas than 100 experts. The impact of that much creativity and perspective can be exponential, and it's hard to duplicate. When I'm designing a system, I hate to have to try to out think everyone on the internet. If you have a known set of opponents you can predict what they might do. When you're up against anybod…

I absolutely disagree. I'll take the word of 100 experts over 10,000 amateurs.

The excellent thing is we have fund size as a scoring system.

Re: Numerai, a hedge fund built by a community of anonymous data scientists

#54

Post by emkman » Wed, Jun 22, 2016, 6:16 AM UTC

theli0nheart wrote: post #8

alexmingoia wrote: post #7

Earlier quoted context omitted.

That's not possible. The data is encrypted. None of the participants can see which stocks (or anything) about the data they train with. Numerai turns stock prediction into a pure ML problem.

Doesn't the encrypted chart still need to display price history or volume? If so it seems like it'd be a trivial task to match it up with its real-world counterpart.

The model has no idea what stock it is predicting. It is just a random ID that represents a security. Further, there are no encrypted charts and no ability to backtest your model outside of the small amount of data provided by Numerai. Download the csv's. They are much smaller than I expected.

Re: Numerai, a hedge fund built by a community of anonymous data scientists

#55

Post by kefka_p » Wed, Jun 22, 2016, 6:25 AM UTC

arcanus wrote: post #23

joncooper wrote: post #17

"It is intuitively obvious that an open access hedge fund will generate more intelligence than a closed system built on a pre-internet, pre-cryptocurrency, pre-AI organizational design." Really? Because the folks with the magic black box aren't capable of funding an Interactive Brokers account to keep 100% of their upside and 100% of their IP? (Also: risk management and order handling are harder problems than signal…

Isn't that the magic of OSS? Linux::Windows, matplotlib::mathematica, android::iPhone, etc. In each case, the free variety quickly catches up to the proprietary version, and in doing so, cuts into the profitability of the parent. Furthermore, this often breaks down monopolies, as they must innovate or die.

While some of the examples are more apt, iPhone/iOS actually integrates a good deal of open source software itself i.e. Darwin, WebKit, LibDispatch, Core Foundation, Swift, etc. Further the openness of Android has been called into question by many over the years. Android isn't just AOSP anymore than iOS is just Darwin. I imagine a degree of the innovation provided by OSS has helped Apple keep profit margins as high as they have.

Re: Numerai, a hedge fund built by a community of anonymous data scientists

#56

Post by darawk » Wed, Jun 22, 2016, 7:08 AM UTC

taneq wrote: post #39

iopuy wrote: post #31

Earlier quoted context omitted.

I absolutely disagree. I'll take the word of 100 experts over 10,000 amateurs.

Examples of the word of 10,000 amateurs: * Anti-vaxxers * The healing power of crystals * Moon landing conspiracy nuts * Multi-level marketing

There are also 'experts' in these fields, so your point is moot.

Re: Numerai, a hedge fund built by a community of anonymous data scientists

#57

Post by tomp » Wed, Jun 22, 2016, 7:11 AM UTC

taneq wrote: post #39

iopuy wrote: post #31

Earlier quoted context omitted.

I absolutely disagree. I'll take the word of 100 experts over 10,000 amateurs.

Examples of the word of 10,000 amateurs: * Anti-vaxxers * The healing power of crystals * Moon landing conspiracy nuts * Multi-level marketing

Examples of the word of 100 experts:

* LTCM implosion

* The Great Recession

* Libyan and Syrian wars

* Fukushima

Re: Numerai, a hedge fund built by a community of anonymous data scientists

#58

Post by roel_v » Wed, Jun 22, 2016, 7:15 AM UTC

Ameo wrote: post #49

sseveran wrote: post #45

Earlier quoted context omitted.

The interesting factor here is strategy sizing. The 100 experts need to manage portfolios of a certain size. The amateurs don't. There are people who can carve out a living of a strategy that has sustainable alpha but would not be attractive to hedge funds due to the capacity of the strategy.

This is absolutely true. Many, many strategies that are viable at small portfolio sizes fall off very quickly when millions, tens of millions of dollars start to be used for them. Although the world's financial markets are massive, the little inefficiencies that can be exploited for profit often aren't.

"This is absolutely true. Many, many strategies that are viable at small portfolio sizes fall off very quickly when millions, tens of millions of dollars start to be used for them."

I've thought this for nearly a decade now, yet have never seen or thought of such a thing. Of course I'm just an idiot so the fact that I didn't think of any means nothing; but you'd think that in all that time looking for it, someone somewhere would have described such a thing, even if only to make money on 'how to find small-portfolio investment strategies' ebooks and seminars.

So I'm curious what makes you say 'absolutely true' rather than 'I think so too'.

Re: Numerai, a hedge fund built by a community of anonymous data scientists

#59

Post by Someone » Wed, Jun 22, 2016, 7:46 AM UTC

richard_craib wrote: post #9

theli0nheart wrote: post #8

Earlier quoted context omitted.

Doesn't the encrypted chart still need to display price history or volume? If so it seems like it'd be a trivial task to match it up with its real-world counterpart.

It would be easy to match an obfuscated stock market dataset with some third party dataset, and this has happened on many Kaggle competitions (data leaks). That's why the encryption here is important.

But how do you encrypt a stock's historical performance without removing the information (performs better in summer, went up after 9/11…) hidden inside it?

You can add noise, but I doubt that will be enough.

Re: Numerai, a hedge fund built by a community of anonymous data scientists

#60

Post by mikkom » Wed, Jun 22, 2016, 7:50 AM UTC

gtrubetskoy wrote: post #22

I'm skeptical. There are skyscrapers in NYC's, Londons, Singapores and Hong Kong's of this world filled with people who are smart and have enormous computer resources and funds and are paid handsomely to work on solving this problem with all manners of ML and AI at their disposal, the "crowd" has no advantage over them. The "closed system" is much larger than the "crowd" in this case.

Unless there are people in the "crowd" who work in machine learning / data mining in totally different sector (let's say genomics/biostatistics as this is the example in the article) but have no access to the hedge fund world.

The "crowd" could very well have a long list of very intelligent people who are "experts" in some other sector and who have fresh insights and want to get some anonymous extra income on top of their salary.

This said, I think their compensation seems really low.