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Numerai – A hedge fund built by a global community of anonymous data scientists

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Re: Numerai – A hedge fund built by a global community of anonymous data scientists

#71

Post by antognini »

daveguy wrote: post #46
antognini wrote: post #38

Earlier quoted context omitted.

The features are all encrypted using homomorphic encryption, which ends up mapping the overall distribuiton uniformly onto [0, 1]. If you play with the dataset, though, you'll find there are some significant correlations between the different features and you can make a model that does substantially better than chance.

I would like to see a comparison between random generated uniform features and these features. Can you fit the noise and come up with "statistically significant" predictions? If so, is anyone doing any better than can be done on random data? If no one is doing better than that, what is the likelihood that these aren't any better than monkey with a dartboard? I would love to see peer reviewed articles from numerai wit…

Whenever I make a model I always do cross-validation to make sure that I'm not overfitting. If we were just fitting random noise I would always see the performance of my test set being no better than chance (or worse).

Re: Numerai – A hedge fund built by a global community of anonymous data scientists

#73

Post by mortehu »

jamez1 wrote: post #67
mortehu wrote: post #64

Earlier quoted context omitted.

The Protégé basket of funds contains five hedge funds, not twenty. The returns are far from indiscernible from S&P 500. At the end of 2015, the S&P 500 portfolio had seen 3x the profits of the Protégé portfolio.

In his case, these were 5 funds of hedge funds. Which underneath could be much more than 20 funds. You're also forgetting how much the compounding of the fees can cost, and you have two layers of them. This could easily make the S&P at least 3x higher in returns after 10 years.

Aha, I had skimmed past the fund of fund parts.

In CFA Institute's estimate, the difference in fees only made up about half of the underperformance at the end of 2014, especially considering that 2008 was an easy win for hedge funds:

https://blogs.cfainstitute.org/investor/2015/02/12/betting-w...

Note that at the end of 2015, eight years had elapsed, not ten.

Re: Numerai – A hedge fund built by a global community of anonymous data scientists

#74

Post by neffy »

delegate wrote: post #26

"It's just a pure math problem. It's like a math competition. You don't need to know anything about finance, you don't know anything about hedge funds... you don't even have to speak English..." This is not a pure math problem. Eventually the outcome of all these models and predictions affects the stock prices and - if it becomes as successful as you hope - the economy as a whole. And the physical world: people, anim…

Agreed - it is a terrible waste of talent.

Ironically, it's also not entirely a math problem - the underlying system doesn't exactly follow the expected rules of math.

Re: Numerai – A hedge fund built by a global community of anonymous data scientists

#75

Post by pyrophane »

wyager wrote: post #70
delegate wrote: post #26

"It's just a pure math problem. It's like a math competition. You don't need to know anything about finance, you don't know anything about hedge funds... you don't even have to speak English..." This is not a pure math problem. Eventually the outcome of all these models and predictions affects the stock prices and - if it becomes as successful as you hope - the economy as a whole. And the physical world: people, anim…

> than this data juggling deep learning bullshit which results in profits being paid out to a bunch of intelligent, greedy and unwise people. Holy anti-intellectualism, Batman! If you describe machine learning as "data juggling bullshit", this is very strong evidence that you simply don't understand what it is. This is an indictment of you, not of machine learning. Machine learning would more accurately be called "ap…

I didn't read it as a criticism of machine learning or intellectuals, but rather of the many bright minds that are trying to make money off of the stock market by writing software to make better trades. This kind of activity doesn't create value or even, to my knowledge, liquidity.

I believe he's suggesting that there are a lot of other areas where their knowledge and skills could be applied which would create some societal benefit as a byproduct.

Re: Numerai – A hedge fund built by a global community of anonymous data scientists

#76

Post by Houshalter »

gravypod wrote: post #65
Houshalter wrote: post #48

Earlier quoted context omitted.

This won't work. As far as I can tell, you don't get to "pick stocks". You just submit predictions for unlabelled variables that could represent anything. It's no different than a standard kaggle competition.

Then could the operators not do this? Just claim that they sent it out to N people and they all suggested the stock. How would you prove they didn't.

Well the hedge fund manager can invest in whatever stocks he wants already, so I don't see the point of this scheme.

Re: Numerai – A hedge fund built by a global community of anonymous data scientists

#77

Post by Houshalter »

wyager wrote: post #70
delegate wrote: post #26

"It's just a pure math problem. It's like a math competition. You don't need to know anything about finance, you don't know anything about hedge funds... you don't even have to speak English..." This is not a pure math problem. Eventually the outcome of all these models and predictions affects the stock prices and - if it becomes as successful as you hope - the economy as a whole. And the physical world: people, anim…

> than this data juggling deep learning bullshit which results in profits being paid out to a bunch of intelligent, greedy and unwise people. Holy anti-intellectualism, Batman! If you describe machine learning as "data juggling bullshit", this is very strong evidence that you simply don't understand what it is. This is an indictment of you, not of machine learning. Machine learning would more accurately be called "ap…

I read it mainly as a criticism of this site and this application of deep learning. Predicting stock prices slightly better doesn't really make the world a better place or improve anyone's lives. But it does consume the time and resources of very intelligent people who might be able to do incredible things elsewhere.

Particularly the problem of this website, is it's huge focus on anonymity. You don't need to expose your code or methods, or even your name. It's an ongoing competition so it encourages secrecy so you can make more money next week.

This means even if someone does invent a new super ML method, they have every incentive to not share it and keep it a secret. So this website could actually have a net negative impact on the world.

Re: Numerai – A hedge fund built by a global community of anonymous data scientists

#78

Post by pjlegato »

dsacco wrote: post #10
bigdubs wrote: post #6

Earlier quoted context omitted.

Monkeys throwing darts at the board. This brings to mind the Buffett hedge fund wager, where he invested in a vanguard s&p 500 tracking fund (VFIAX) and a hedge fund actively managed an equal amount, and Mr. Buffett ended up winning handily.

It's easy to be dismissive of this, especially by working from the popular Warren-Buffet-index-funds-beat-hedge-funds story that makes the rounds. It's true that most hedge funds and active traders lose money (or at least, underperform the market). But as I am fond of pointing out, there are a non-negligible number of funds and traders who consistently and demonstrably earn significantly stronger returns than the mar…

They are betting that there exist people who are capable of performing that work who cannot work at a hedge fund, for whatever reason.

Perhaps they live in the wrong location -- it's hard/impossible to get a quant job if you don't live in a major market center. Not everyone is 23 years old and unattached and prepared to move around the world for a job.

Perhaps they can do the predictions but they didn't go to a high end university and have no track record -- just try even getting an interview at a hedge fund without one of those.

Re: Numerai – A hedge fund built by a global community of anonymous data scientists

#79

Post by Houshalter »

jamez1 wrote: post #68
dooglius wrote: post #60

Earlier quoted context omitted.

Yes, I realize that. The issue is that the result of any operation is also encrypted, which means that there should be no way to connect the target of the training data (encrypted or not) to the output of a function of encrypted data. Suppose the unencrypted data is (a,b,c) where a+b=c, and (x,y,z)=encrypt((a,b,c)). We have an addition function plus on encrypted data such that decrypt(plus(x,y))=a+b=c=decrypt(z), but…

They could just be normalizing every data point to be between 0 and 1 by dividing by the range. That's a homomorphic encryption.. it passes your weird assumptions. I don't know why you're harping on about sound encryption, the point of this is to keep the statistical information intact in the cipher, without giving away the underlying market data.

It's very weird to call data normalization "encryption". This is just a standard procedure done on most datasets. Encryption implies they've gone to extra processing to make sure you can't figure out what the variables mean.

I think it's either an abuse of the word 'encryption'. That, or they really have done something weird to this dataset. Which will probably make it useless for statistical algorithms. Even normalization destroys a lot of useful information.

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