Mind Matters Natural and Artificial Intelligence News and Analysis

Tagstock market

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Faster Computers Lead to More Wealth, Right? What Could Go Wrong?

What if fast computers get in the way of carefully considering information before starting trades?

In this week’s podcast, tech philosopher George Gilder and computer engineer Robert J. Marks, our Walter Bradley Center director, continued their discussion of the impact of artificial intelligence (AI). This time, they focused on the way AI affects the stock market, for better or worse. You can download Gilder’s new book, Gaming AI, for free here. The first part of the discussion between Gilder and Marks is here. Meanwhile… https://episodes.castos.com/mindmatters/Mind-Matters-106-George-Gilder.mp3 From the transcript: (Show Notes, Resources, and a link to the complete transcript follow.) Robert J. Marks: I had a friend, Jack Marshall, who was a professor of financial engineering. He was approached all the time by people who said, “I have beat the market by artificial intelligence.” And of…

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Bitcoin statistics

Artificial Intelligence Gaming the Stock Market

What are some assumptions about artificial intelligence? How does artificial intelligence affect the stock market? George Gilder and Robert J. Marks discuss assumptions about artificial intelligence, the stock market, and George Gilder’s new book Gaming AI: Why AI Can’t Think but Can Transform Jobs (which you can get for free here). Show Notes 00:30 | Introducing George Gilder 01:02 |…

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Bull market trend, green growth arrow. Stock Exchange and concept of a trading chart. Low poly, wireframe 3d Raster illustration. Abstract polygonal image on blue neon background

The Stock Market Keeps Rising Despite COVID. Is It Nuts?

I’ve been asked whether advanced AI can explain the conundrum

What is going on? Our GDP has collapsed and 16 million people are unemployed. Thousands of small businesses and dozens of billion-dollar companies have gone bankrupt, including California Pizza Kitchen, Hertz, JCPenney, Neiman Marcus, and Brooks Brothers. Yet, the stock market keeps hitting all-time high after all-time high. The stock market is supposed to be related to the economy. When the economy booms, corporate profits explode; when the economy collapses, profits crater. That’s what happened during the Great Depression when stock prices fell 90 percent and the unemployment rate averaged 19 percent for a decade. Now, stocks and the economy are moving in opposite directions. What is going on? A friend who knows that I live, breathe, and teach investments…

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Businessman in ponzi scheme concept

Stocks Are Not a Ponzi Scheme and Here’s Why Not

When you mail a letter to someone in another country, you can enclose an international reply coupon (IRC) that can be exchanged for that country’s postage stamps and used to mail a letter back to you. It is like enclosing a self-addressed stamped envelope except that you do not need to figure out how to buy foreign postage stamps. It is the polite thing to do but also the source of the most famous swindle in history. In 1920, a Massachusetts man named Charles Ponzi (right, in 1920) promised to pay investors 50 percent interest every 45 days. Compounded eight times a year, the effective annual rate of return was 2,463 percent! He said that his profits would come from…

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Coronavirus, covid-19 news headlines on United States of America 100 dollar bills. Concept of financial impact, stock market decline and crash due to worldwide pandemic

The Stock Market: Gains, Pains, and Panics

A fear that, if prices fall, they will continue falling is not justified by history but by panic

A psychological quirk called loss aversion makes us fear losses far more than we value gains. The panic investors experience from sudden losses can blind them to the overall, long-term picture.  We can demonstrate this tendency with a simple thought experiment.

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Polygonal art of Bullish vs Bearish

Ransacking Flawed Data For Hidden Treasures Seldom Ends Well

The Internet provides a firehose of data that financial market researchers can use to interpret human behavior—but cherry-picked patterns usually vanish

The explosion of data has vastly increased the number of coincidental patterns that can be discovered by tenacious researchers. If there are a relatively fixed number of useful patterns and the number of coincidental patterns is growing exponentially, then the ratio of useful patterns to useless patterns must necessarily be getting closer to zero every day.

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Photo by Austin Distel

EVERYONE Can Beat the Market!

We’ve all heard: “No one can beat the market.” Is that true? Let’s look a little deeper

Using your talents to identify and invest in high-quality assets and pull money away from low-quality assets is a benefit to everyone involved in the market and, on the larger scale, the market’s future. If you invest in this way, you will beat the market.

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Serious Investors Should Embrace the Stock Market Algos!

We can use computers’ inability to distinguish meaning from noise in data to our advantage

Computer algorithms are much, much better than humans at discovering statistical patterns but much, much worse than humans at discerning whether the patterns are meaningful. Wise investors can use the resulting blips to their advantage.

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Bingecast: Is Cheese Consumption Causing Deaths from Tangled Sheets?

Those dealing with data must always remember “If you torture data long enough, it will confess to anything.” The answers that computers give must themselves be questioned. Robert J. Marks and Gary Smith address artificial intelligence, spurious correlations, and data research on Mind Matters. Show Notes 01:34 | Introduction to Gary Smith, the Fletcher Jones Professor of Economics at Pomona…

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The Surprising Importance of a Stock’s Name

Business media have picked up on Gary Smith’s research on the importance of stock ticker names, like WOOF or BABY

The fabled Economist also chimed in, sniffing that Smith’s team’s result was “too farfetched for a sitcom”… but didn’t dispute it.

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Who Creates Information in a Market?

Do exchange-traded funds (ETFs)' algorithms make personally gathering information obsolete?

Algorithmic strategies can only be as good as the information that goes into them.  Ignoring how the information is created causes us to misunderstand the dynamics of value creation.  Algorithms can leverage information, they can’t create it.

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