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They Still Haven't Told You

arxiv.org

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Re: They Still Haven't Told You

#51

Post by Centigonal »

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?

The author explains what he thinks is happening on page two of this paper (which he cites in the OP, but doesn't actually explain): https://arxiv.org/pdf/1912.01708.pdf

TL;DR: Stock prices in the US go up overnight and come down during the trading session. The only explanation must be that some shadowy trading firm with a lot of money is buying a bunch of $stock in the morning and selling it back later in the day (at a loss), because it inflates the value of their much larger stockpile of $stock that they hold onto overnight.

Re: They Still Haven't Told You

#52

Post by galaxyLogic »

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…

Or does it just feel that way because overnight as much is happening in the real world as during the day, but nothing is happening in the stock-market? Then when morning comes a lot happens in the stock-market to sync it with the state-change overnight.

Re: They Still Haven't Told You

#54

Post by vineyardmike »

m3kw9 wrote: post #36

So he is saying large firms use money to pump up prices early morning to promote FOMO and chaos and they would trade the predictable chaos and even after they sell their initial pump, they still make money?

No.

He is saying that some firm own lots of $stock that they buy-and-hold. They then buy smaller amount of $stock early in morning to cause a swing up in price. Over course of day, the ability to influence price declines, so they can sell the amount they just bought without influencing price as much. Sell for profit or loss, doesn't matter.

The root goal (how they make money) is that they should have influenced the price enough that the large buy-and-hold stock they own has increased in value. Specifically, they want the "overnight" price change to be more positive than the decline across the day (again, by pumping up the morning price). They don't have to buy/sell, its more the value of their holdings are higher.

Re: They Still Haven't Told You

#55

Post by paulpauper »

posnet wrote: post #50
paulpauper wrote: post #24

Earlier quoted context omitted.

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...

You don't geta 60% cagr with tax loopholes. all hedge funds try to minimize their taxes by whatever means possible.

Re: They Still Haven't Told You

#56

Post by kd0amg »

> Figure 2 shows plots of overnight and intraday returns for twenty-one major stock market indices around the world. Turn the page and compare Figure 1 with Figure 2. See if you can tell a difference.

These images... do not render well on my machine, to put it lightly. So they look remarkably similar to me. Perhaps the author could spell out what this difference is? There is eventually mention of "striking similarity in the overnight and in- traday return patterns in the indices around the globe," but I don't think I'm ready to conclude that strong correlation of phenomena across markets in a global economy must be caused by a collection of manipulators acting on all of those markets.

I'm curious to see what others have to say, since I lack the hardware and background to properly read this document.

Re: They Still Haven't Told You

#57

Post by nwiswell »

bloodyplonker22 wrote: post #41
paulpauper wrote: post #32

Earlier quoted context omitted.

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.

I don't understand: if this is a persistent effect why can't you short in the morning and cover in the afternoon?

Re: They Still Haven't Told You

#58

Post by vineyardmike »

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.

One good reason is that the employee retirement fund is the Medallion fund, so employees profit from the firms continued success.

Re: They Still Haven't Told You

#60

Post by galaxyLogic »

Centigonal wrote: post #51
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?

The author explains what he thinks is happening on page two of this paper (which he cites in the OP, but doesn't actually explain): https://arxiv.org/pdf/1912.01708.pdf TL;DR: Stock prices in the US go up overnight and come down during the trading session. The only explanation must be that some shadowy trading firm with a lot of money is buying a bunch of $stock in the morning and selling it back later in the day (at…

If they sell later in the day that should bring the price down. How does that increase the value of the stock overnight?
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