-----Message d'origine-----
De : jk_stratton@... <jk_stratton@...>
À : Behavioral-Finance@egroups.com <Behavioral-Finance@egroups.com>
Date : vendredi 30 juin 2000 22:34
Objet : [Behavioral-Finance] Re: Old BF stuff


>--- In Behavioral-Finance@egroups.com, "Peter GREENFINCH"
><pgreenfinch@w...> wrote:
><snip>
>> And let us go back to the other question above :
>> How big traders, familiar with these and other
>> heuristic biases, use them, and how this can
>> affect the market ?
>>
>> PG
>
>One angle may be to look at the consequenses. It's the negative "side-
>effects" of cognitive biases that BF has focused on. They cause
>serious errors in judgements that can get you into trouble or (even
>worse IMO) cause you to miss opportunities.
>
>Presumably an awareness of heuristics (they're mostly good, of
>course; they get us through daily life) helps sidestep traps, which
>is mostly what the literature has dealt with, and not overlook
>opportunities.
>
>I'd expect wider knowledge and use will limit those opportunities,
>but as I said in my other reply, I've reason to think that knowledge
>dosen't auto-translate into use.
>
I see here also the question of investment styles.
Is the right investment style the ability to change style when the market
change ? But is it possible humanly ? What about a rotation of managers in
the same fund ?

--- In Behavioral-Finance@egroups.com, "pgreenfinch"
<pgreenfinch@w...> wrote:
> -----Message d'origine-----
> De : jk_stratton@s... <jk_stratton@s...>
> À : Behavioral-Finance@egroups.com <Behaviora
l-Finance@egroups.com>
> Date : vendredi 30 juin 2000 22:34
> Objet : [Behavioral-Finance] Re: Old BF stuff
>
>
> >--- In Behavioral-Finance@egroups.com, "Peter GREENFINCH"
> ><pgreenfinch@w...> wrote:
> ><snip>
> >> And let us go back to the other question above :
> >> How big traders, familiar with these and other
> >> heuristic biases, use them, and how this can
> >> affect the market ?
> >>
> >> PG
> >
> >One angle may be to look at the consequenses. It's the
negative "side-
> >effects" of cognitive biases that BF has focused on. They cause
> >serious errors in judgements that can get you into trouble or (even
> >worse IMO) cause you to miss opportunities.
> >
> >Presumably an awareness of heuristics (they're mostly good, of
> >course; they get us through daily life) helps sidestep traps, which
> >is mostly what the literature has dealt with, and not overlook
> >opportunities.
> >
> >I'd expect wider knowledge and use will limit those opportunities,
> >but as I said in my other reply, I've reason to think that
knowledge
> >dosen't auto-translate into use.
> >
> I see here also the question of investment styles.
> Is the right investment style the ability to change style when the
market
> change ?

Surely, flexibility plays into it, and you can say that being on the
right side of change is what investment success is about. It's
probably a balancing act between flexibility and consistency, since
you don't want J.P. Circumstance running your portfolio, with the
trading costs and taxes and other overhead.

But is it possible humanly ?

Oh, I'm sure it is for some people. I have to admit that I'm asking
this question of myself now. My growth investment approach which has
done so well since I started is a problem this year since growth
technology stocks are so visible nowadays and it's become hard to
find growth at a reasonable price.

It's just my anecdotal experience, but I find that leaving a strategy
that I've been successful with - and is all I'm experienced with -
and trying to change my M.O. this year is easier said than done.

What about a rotation of managers in
> the same fund ?

I'm sorry, I don't understand?

Jan

I am looking to hire a VB programmer to design trading systems for the stock
market.  Requires knowledge of Visual Basic, knowledge of trading and
development and testing of trading systems.

Offers competitive salary, 401(k), stock options and medical.

Location is Sarasota, Florida - which is about 1 hour south of Tampa.

Please respond directly to peterg67@....

Thanks.

-----Message d'origine-----
De : jk_stratton@... <jk_stratton@...>
À : Behavioral-Finance@egroups.com <Behavioral-Finance@egroups.com>
Date : samedi 1 juillet 2000 17:11
Objet : [Behavioral-Finance] Re: Old BF stuff

What about a rotation of managers in
> the same fund ?

J : I'm sorry, I don't understand?

PG : I mean, as each manager may have some biases and pet habits, and may
forget to look close enough in the hidden corners of the portfolio it
manages, if fund managers swap jobs at regular intervals (between funds or
sub-funds belonging to the same house and having more or less the same
policy preferably), let us say every 6 months, a fresh eye may help make
some spring and fall housecleaning.

PG

--- In Behavioral-Finance@egroups.com, "pgreenfinch"
<pgreenfinch@w...> wrote:
>
> -----Message d'origine-----
> De : jk_stratton@s... <jk_stratton@s...>
> À : Behavioral-Finance@egroups.com <Behaviora
l-Finance@egroups.com>
> Date : samedi 1 juillet 2000 17:11
> Objet : [Behavioral-Finance] Re: Old BF stuff
>
> What about a rotation of managers in
> > the same fund ?
>
> J : I'm sorry, I don't understand?
>
> PG : I mean, as each manager may have some biases and pet habits,
and may
> forget to look close enough in the hidden corners of the portfolio
it
> manages, if fund managers swap jobs at regular intervals (between
funds or
> sub-funds belonging to the same house and having more or less the
same
> policy preferably), let us say every 6 months, a fresh eye may help
make
> some spring and fall housecleaning.
>
> PG

Like the 4 fund managers Adam Smith described in "The Money Game"?

J :Like the 4 fund managers Adam Smith described in "The Money Game"?

PG: I see we have the same good readings :)

A just for fun question. Maybe another way to ask; will the best
trader(s) someday be AI software?

Jan

--- In Behavioral-Finance@egroups.com, "pgreenfinch"
<pgreenfinch@w...> wrote:
>
> J :Like the 4 fund managers Adam Smith described in "The Money
Game"?
>
> PG: I see we have the same good readings :)

J: Perhaps a better way to accomplish the objectives of building
strengths and lowering weaknesses and diversifying decision making
would be to give each manager 20% of the fund and allocate the other
20% to statistical-based trading that tries to strike a balance, say
with derivatives, and get the best blend of features?

--- In Behavioral-Finance@egroups.com, "Peter GREENFINCH"
<pgreenfinch@w...> wrote:
> Evidence of psychological barriers in the conditional moments of
> major world stock indices
>
> http://www.elsevier.nl/cgi-
> bin/cas/tree/store/revfin/cas_sub/browse/browse.cgi?
> year=1999&volume=8&issue=1&aid=1

I thanks Roman that told me that that URL
did not respond
I don't know if there is a problem with Elsevier,
I think something is wrong also with my browser
that truncated or split the URL (see the full URL above).
I am afraid I cannot do much about it,
but as a "default" answer,
I would say to members that the Elsevier
website / diffusion list
is something interesting in itself
http://www.elsevier.nl/homepage/sae/econbase/menu.sht

Another good site, more directly directed to BF papers is
http://papers.ssrn.com/toptens/tt_jrnl_119091_r_60.html

Good reading
PG

--- In Behavioral-Finance@egroups.com, >
> I thanks Roman that told me...

Sorry, it was Norman, not Roman.
We gallic people have been obnubilated by the Romans since two
millenium ago,
all the more now as we won the Euro soccer cup yesterday against
Italy (by a bit of luck I recognise, but a game is a game, and we
were the best after all, haha :)

Btw, I will post something in another message, about a communication
from Alexandre Delaigue about Mimetic rational expectations, after he
observed some funny poll in a French TV channel.

PG

Peter,

It does work after a bit of massaging, ie copy it to an ASCII text editor
and edit it into a single line before pasting it back to the web-browser.
Somehow your mailer have broke it into pieces.

The following is clickable.

http://www.elsevier.nl/cgi-bin/cas/tree/store/revfin/cas_sub/browse/browse.c
gi?year=1999&volume=8&issue=1&aid=1

KL

----- Original Message -----
From: "Peter GREENFINCH" <pgreenfinch@...>

> >
> > http://www.elsevier.nl/cgi-
> > bin/cas/tree/store/revfin/cas_sub/browse/browse.cgi?
> > year=1999&volume=8&issue=1&aid=1
>
> I thanks Roman that told me that that URL
> did not respond
> I don't know if there is a problem with Elsevier,

Peter,

Oops! Looks like my Outlook Express does the same due to the length of the
URL.  It was correctly underlined when I was composing the reply.  So back
to the initial suggestion of using a text editor to fix it up.

KL

----- Original Message -----
From: "K Low" <klow@...>

> Peter,
>
> It does work after a bit of massaging, ie copy it to an ASCII text editor
> and edit it into a single line before pasting it back to the web-browser.
> Somehow your mailer have broke it into pieces.
>
> The following is clickable.
>
>
http://www.elsevier.nl/cgi-bin/cas/tree/store/revfin/cas_sub/browse/browse.c
> gi?year=1999&volume=8&issue=1&aid=1
>
> KL
>
> ----- Original Message -----
> From: "Peter GREENFINCH" <pgreenfinch@...>
>
> > >
> > > http://www.elsevier.nl/cgi-
> > > bin/cas/tree/store/revfin/cas_sub/browse/browse.cgi?
> > > year=1999&volume=8&issue=1&aid=1
> >
> > I thanks Roman that told me that that URL
> > did not respond
> > I don't know if there is a problem with Elsevier,

Here is my translation (I hope I did it right) of a communication from Alexandre Delaigue, 29.06. 2000, an animator of the French website:  http://www.multimania.com/econoclaste/

The soccer Euro cup was a new opportunity to check the difference between mimetic behavior and fundamentalist behavior. We saw it in the France2 TV channel, with the "podium game". Here is the principle : during each match, the viewers phone and name the 3 players they feel are the best of that match. The game bring prizes: the viewer giving the ranking that is the closest to the final one wins a TV set. So, here is the problem: is it better to select the players it thinks are the bests, or to try to forecast those the other viewers will consider the bests? The initiated will have recognised the famous keynesian beauty contest.

The interest of the game was to show that, in that case, the fundamentalist behavior (to choose the best players using objective criteria) is clearly anti-optimal. The typical example was the third match played by Portugal (against Germany, victory 3-0). Once the podium is announced, surprise! It includes two players (Figo and another one) that never left the side bench during the match! How to explain that?

Just because the viewers, instead of trying to find the good players in the match, prefered to anticipate the general opinion. And for that, they chose the best-known players. Who cares if they did not play. And these viewer were right: the moronic one who made absent players play won a TV set! While the one who patiently dissected the match spent 3,23F in phone call for no avail...

The fascinating side of the game, is that it shows the total randomness of the ranking outcomes. Sometimes, players are selected on how famous they are. At other times, the ranking just mirrors the commentators'one: they repeat some names with such insistent high praise that the viewers try those names.  Who cares if the next day the main sport newspaper gives them a low grade! And sometimes the criterium is semi-fundamentalistic: the players who scored 3 goals during another match were systematicaly ranked first. We have here a self-realizing prophecy leading to the "good" result: the "fundamental" result is obvious for everybody, and everybody knows it is obvious for everybody. In that Portugal - Germany match, for example, the best Portuguese scorer was ahead in the votes (it was the two next good ones that did not play).

Just copy BOTH pieces, one after the other, into your web browser address
window and click enter AFTER all the pieces are in place.

-----Original Message-----
From: K Low [mailto:klow@...]
Sent: Monday, July 03, 2000 3:31 AM
To: Behavioral-Finance@egroups.com
Subject: Re: [Behavioral-Finance] Re: New paper

Peter,

Oops! Looks like my Outlook Express does the same due to the length of the
URL.  It was correctly underlined when I was composing the reply.  So back
to the initial suggestion of using a text editor to fix it up.

KL

----- Original Message -----
From: "K Low" <klow@...>

> Peter,
>
> It does work after a bit of massaging, ie copy it to an ASCII text editor
> and edit it into a single line before pasting it back to the web-browser.
> Somehow your mailer have broke it into pieces.
>
> The following is clickable.
>
>
http://www.elsevier.nl/cgi-bin/cas/tree/store/revfin/cas_sub/browse/browse.c
> gi?year=1999&volume=8&issue=1&aid=1
>
> KL
>
> ----- Original Message -----
> From: "Peter GREENFINCH" <pgreenfinch@...>
>
> > >
> > > http://www.elsevier.nl/cgi-
> > > bin/cas/tree/store/revfin/cas_sub/browse/browse.cgi?
> > > year=1999&volume=8&issue=1&aid=1
> >
> > I thanks Roman that told me that that URL
> > did not respond
> > I don't know if there is a problem with Elsevier,



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A good perspective on this may be provided by a book named "The Predictors".

--- In Behavioral-Finance@egroups.com, "Gord Cruikshank" <gordc@i...>
wrote:
> A good perspective on this may be provided by a book named "The
Predictors".

Thank you, Gord; I looked up "The Predictors" after reading your post
and it looks quite interesting.

What I mean to ask is your (and others') views on whether computer-
directed trading/decision making will be superior to human trading
someday. Perhaps some people believe we're reaching that point
already. Systems trading is the first move in that direction, it
seems to me. The basic rationale (if I understand) is systems'
superior monitoring capability and lack of human cognitive/emotional
limitations.

Any systems traders here who could give their insights?

Jan

Well, I would argue that someone operating on the greater fool theory
is acting rationally (assuming they're aware of it).

I'm not all that sure that fundamentals = Reality, though I'm a fundy
myself. For example, order flow is clearly real, and so is technical
(price and volume) data from it. I think financial statements are not
fiction, but not unqualified statements of "hard facts" either. And
economic data is an abstraction.

Jan

--- In Behavioral-Finance@egroups.com, "pgreenfinch"
<pgreenfinch@w...> wrote:
> This is a repost from this morning. It seems the first one did not
go through to the group. Well if it does that will be a duplicate,
sorry.
>
> Markets show "reflexivity" when their actions are inspired by their
own behavior rather than by reality (fundamentals). This imitative
conduct has its rational side and may allow to gain from it. Except
of course if, by wearing of, or after a massive event, it ends up
being put in check. Alexandre Delaigue seized a real-life example by
watching a TV game.
> Here is my translation (I hope I did it right) of a communication
from Alexandre Delaigue, 29.06. 2000, an animator of the French
website:  http://www.multimania.com/econoclaste/
>
>   The soccer Euro cup was a new opportunity to check the difference
between mimetic behavior and fundamentalist behavior. We saw it in
the France2 TV channel, with the "podium game". Here is the
principle : during each match, the viewers phone and name the 3
players they feel are the best of that match. The game bring prizes:
the viewer giving the ranking that is the closest to the final one
wins a TV set. So, here is the problem: is it better to select the
players it thinks are the bests, or to try to forecast those the
other viewers will consider the bests? The initiated will have
recognised the famous keynesian beauty contest.
>
>   The interest of the game was to show that, in that case, the
fundamentalist behavior (to choose the best players using objective
criteria) is clearly anti-optimal. The typical example was the third
match played by Portugal (against Germany, victory 3-0). Once the
podium is announced, surprise! It includes two players (Figo and
another one) that never left the side bench during the match! How to
explain that?
>
>   Just because the viewers, instead of trying to find the good
players in the match, prefered to anticipate the general opinion. And
for that, they chose the best-known players. Who cares if they did
not play. And these viewer were right: the moronic one who made
absent players play won a TV set! While the one who patiently
dissected the match spent 3,23F in phone call for no avail...
>
>   The fascinating side of the game, is that it shows the total
randomness of the ranking outcomes. Sometimes, players are selected
on how famous they are. At other times, the ranking just mirrors the
commentators'one: they repeat some names with such insistent high
praise that the viewers try those names.  Who cares if the next day
the main sport newspaper gives them a low grade! And sometimes the
criterium is semi-fundamentalistic: the players who scored 3 goals
during another match were systematicaly ranked first. We have here a
self-realizing prophecy leading to the "good" result:
the "fundamental" result is obvious for everybody, and everybody
knows it is obvious for everybody. In that Portugal - Germany match,
for example, the best Portuguese scorer was ahead in the votes (it
was the two next good ones that did not play).

-----Message d'origine-----
De : jk_stratton@... <jk_stratton@...>
À : Behavioral-Finance@egroups.com <Behavioral-Finance@egroups.com>
Date : mardi 4 juillet 2000 02:25
Objet : [Behavioral-Finance] Restatement of ( Will a computer program ever
be superior to humans in trading?)


>--- In Behavioral-Finance@egroups.com, "Gord Cruikshank" <gordc@i...>
>wrote:
>> A good perspective on this may be provided by a book named "The
>Predictors".
>
>Thank you, Gord; I looked up "The Predictors" after reading your post
>and it looks quite interesting.
>
>What I mean to ask is your (and others') views on whether computer-
>directed trading/decision making will be superior to human trading
>someday. Perhaps some people believe we're reaching that point
>already. Systems trading is the first move in that direction, it
>seems to me. The basic rationale (if I understand) is systems'
>superior monitoring capability and lack of human cognitive/emotional
>limitations.
>
Well first, together with the soul of my compatriots Archambault and
Lafayette, I wish, a good independence day to all US friends, either members
or not members (still a majority, I wonder why :) of our list

Maybe once the system trading game gets stabilised, the match can become
systems against systems (hypothesis 1). But before, as long as human
investors intervene directly in the market (hypothesis 2), system trading
will have to take into account these human cognitive / emotional limitation,
thus sometimes mimicking their biases (here again comes mimetic rational
expectations).
A thing in favor of hypothesis 2, is that human may not accept to leave all
the fun to systems.
Here, I will play third rate Sigmund.
What if the hidden motivation of most investors has nothing to do with
making money ? What if the real motivation of casino players is to loose
money (maybe feeling that money is unpure, or wanting to get punished for
their sins...), or at least (here, much less puritan or masochist things)
feeling disatisfied with life, or longing for the thrill of risking it ?
When you think about it, maybe one or the other motive explains why casino
has so much success.
Let us suppose that human don't want to give up the game (and the mind game)
to systems and to lose all the positive / negative fun or emotion, that will
mean  hypothesis 2 with the following effects:
* system trading will have to take that into account these (in fact quite
diverse) human motivations (but how ?) to beat the market
* system trading may not generalise, as it deprives of the game
The alternative (hypothesis 1) is that human investors surrrender to system
trading, so than it runs the show. Then market will be efficient, meaning
with always the right price, without arbitrage opportunity thus with ...no
transactions. Well, except if each systems obey to completely different
rules and paradigms than the other competing systems. Kind of playful,
maverick, fun-seeking systems ,
I admit that with either hypothesis 1 or 2, I am fantazing completely...
Investors don't play, or do they ? Systems neither, or do they ?

PG

You pose an interesting question, and the reason I replied with such a curt
answer is this:
Computerised trading systems are simply automated extensions of an
individual's (or group's) trading philosophy.  Once the system is employed,
it trades within the boundaries of the programmer's master plan.  Certainly
there are "smart" systems such as neural networks and genetic algorithms,
but they are very prone to overlearning.  This means they need "mothering"
(human influence) to keep them pointed in the proper direction.

Now, imagine for an instant that tomorrow every trader on earth turned over
their trading style to a computer.  For a very short time (maybe measured in
hours or perhaps days) the market would become efficient.  However, as soon
as one of those traders changed their algorithms, an adjustment would take
place.  Still efficient?  Not likely, since most traders are looking for
some sort of edge.  Perhaps someone implements an automated news reader or
email reader service into their automated trading system.  See where this is
heading?  Eventually there is a return to the market model we use today.

Furthermore, an interesting postulate is: once all traders are "automated",
wouldn't many of the patterns (i.e. head and shoulders) become overtraded
and perhaps insignificant?  Maybe even destructive?

You pose a question which I have had to answer many times.  The interesting
thing is that there is no specific answer...just theories.  ...very
interesting theories.  I shall watch this thread closely.

Dear BF readers,

Anyone of you is so kind to send me please the collection of the
previous 60 Digests?

Please do no send the individual messages,  I can access them from
eGroups.
Thanks.

Regards,

Alberto

I agree G, and I'd thought of saying more in my reply that current
systems are (only) rote algorithms based on someone's beliefs and
practises coded into software. But I wanted to emphasise asking for
someone else's views and kicking in a discussion and didn't want to
divert that writing a longer post.

Also, from what I've read/seen, systems trading is technical and
based on pattern recognition (most often trend following). So,
systems traders prefer automated to human tape reading. I guess a
subset of my question mutates to "will a system be better at tape
reading than a human?"

(BTW, I didn't include risk control in that question, because asset
allocation is calculation and best automated, while other aspects of
risk control can deal with unquantified novel situations).

There's also the possiblity of fundamental-based systems. Tweedy
Browne, the OTC micro cap market maker, generates quotes for it's
stocks automatically using Graham&Dodd style valuation criteria. And
I've heard of an investment group that first developed/used a refined
G&D selection rules based expert system 8 years ago. I can imagine
that a "run the numbers" value investment program (with a highly
divers portfolio) would be better.

Jan

--- In Behavioral-Finance@egroups.com, "Gord Cruikshank" <gordc@i...>
wrote:
> You pose an interesting question, and the reason I replied with
such a curt
> answer is this:
> Computerised trading systems are simply automated extensions of an
> individual's (or group's) trading philosophy.  Once the system is
employed,
> it trades within the boundaries of the programmer's master plan.
Certainly
> there are "smart" systems such as neural networks and genetic
algorithms,
> but they are very prone to overlearning.  This means they
need "mothering"
> (human influence) to keep them pointed in the proper direction.
>
> Now, imagine for an instant that tomorrow every trader on earth
turned over
> their trading style to a computer.  For a very short time (maybe
measured in
> hours or perhaps days) the market would become efficient.  However,
as soon
> as one of those traders changed their algorithms, an adjustment
would take
> place.  Still efficient?  Not likely, since most traders are
looking for
> some sort of edge.  Perhaps someone implements an automated news
reader or
> email reader service into their automated trading system.  See
where this is
> heading?  Eventually there is a return to the market model we use
today.
>
> Furthermore, an interesting postulate is: once all traders
are "automated",
> wouldn't many of the patterns (i.e. head and shoulders) become
overtraded
> and perhaps insignificant?  Maybe even destructive?
>
> You pose a question which I have had to answer many times.  The
interesting
> thing is that there is no specific answer...just theories.  ...very
> interesting theories.  I shall watch this thread closely.

Arguing with PG for the hell of it :)

First (please see below), the game has gotten to the point where
sucessful systems traders most likely must account for the limits of
both humans' cognitiion and emotion and systems' "domain drift" to
compete successfully. A new spin on Keynes's beauty contest?

Second, playing wannabe Carl here, I speculate that a lot of
speculators are "get rich quick" types and are not about to let
something lame like reality get in the way of their dreams. You can
look at some of the posts in misc.invest.futures newsgroup to find
examples. How do those traits affect hypothesis 2?

(Unrelated to earlier posts)
In futures markets, (direction trading) systems traders competing
with both human traders *and* each other have been a significant
factor in the markets for 10-15 years now. (Historically, there were
systems traders as far back as the 1970s, although there were higher
barriers to entry (access to computer resources and systems
development) and the number was low enough that I'm sure they didn't
much worry about their own aggregate effects for years.)

Given the ease of entry for system trading, I think there's been a
gold rush of people into systems trading during the 1990s. Most of
them of course give their money to their brokers and other players,
and a few join the # of existing (btw, I wonder if there's a high
turnover?) successful systems traders.

So, I see a contradiction (right word?):

1. Assuming systems trading is successful beyond chance expectations
(and I believe there really are successful systems traders due to
ability) they're going to accumulate wealth and at least partly
expand their trading out of retained earnings, and more or less prove
the superiority of (some) systems traders to Most traders.

2. But if there's a lot of money out there trading off systems - and
their is - at some point that has to limit the available
opportunities for systems traders. Nothing exceeds like success,
especially in a zero-sum game like futures markets, where successful
speculators in the final analysis make their money off of
unsuccessful speculators and utilitarian traders.

Hmmm..

Here's what I think will happen: the market adjustment to systems
trading overcrowding will not be smooth, but will be a sharp
discontinuous process in which there will be a shakeout of the mass
of systems traders, with a few players somehow adapting and riding it
out and a few leaving the game to maybe come back later when the
storm is over.

Jan

--- In Behavioral-Finance@egroups.com, "pgreenfinch"
<pgreenfinch@w...> wrote:
<snip>
> Maybe once the system trading game gets stabilised, the match can
become
> systems against systems (hypothesis 1). But before, as long as human
> investors intervene directly in the market (hypothesis 2), system
trading
> will have to take into account these human cognitive / emotional
limitation,
> thus sometimes mimicking their biases (here again comes mimetic
rational
> expectations).
> A thing in favor of hypothesis 2, is that human may not accept to
leave all
> the fun to systems.
> Here, I will play third rate Sigmund.
> What if the hidden motivation of most investors has nothing to do
with
> making money ? What if the real motivation of casino players is to
loose
> money (maybe feeling that money is unpure, or wanting to get
punished for
> their sins...), or at least (here, much less puritan or masochist
things)
> feeling disatisfied with life, or longing for the thrill of risking
it ?
> When you think about it, maybe one or the other motive explains why
casino
> has so much success.
> Let us suppose that human don't want to give up the game (and the
mind game)
> to systems and to lose all the positive / negative fun or emotion,
that will
> mean  hypothesis 2 with the following effects:
> * system trading will have to take that into account these (in fact
quite
> diverse) human motivations (but how ?) to beat the market
> * system trading may not generalise, as it deprives of the game
> The alternative (hypothesis 1) is that human investors surrrender
to system
> trading, so than it runs the show. Then market will be efficient,
meaning
> with always the right price, without arbitrage opportunity thus
with ...no
> transactions. Well, except if each systems obey to completely
different
> rules and paradigms than the other competing systems. Kind of
playful,
> maverick, fun-seeking systems ,
> I admit that with either hypothesis 1 or 2, I am fantazing
completely...
> Investors don't play, or do they ? Systems neither, or do they ?
>
> PG

jk_stratton@... wrote:
>
> Arguing with PG for the hell of it :)
>
> First (please see below), the game has gotten to the point where
> sucessful systems traders most likely must account for the limits of
> both humans' cognitiion and emotion and systems' "domain drift" to

What's wrong with an automoated system?

Anything that a human can do following some heuristics a computer
program can do.


>

--
Regards, Mark
/\/\/\/\/\....I love humanity. It's people I can't stand...../\/\/\/\/\
==-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-==
hubeyh@... =-=-=-=-=-= http://www.csam.montclair.edu/~hubey

Let me know when you teach a computer to play high level bridge.
Ronald Davis, CMT
----- Original Message -----
From: "H. Mark Hubey" <HubeyH@...>
To: <Behavioral-Finance@egroups.com>
Sent: Tuesday, July 04, 2000 17:37 PM
Subject: Re: [Behavioral-Finance] Re: Restatement of ( Will a computer
program ever be superior to humans in trading?)


>
>
> jk_stratton@... wrote:
> >
> > Arguing with PG for the hell of it :)
> >
> > First (please see below), the game has gotten to the point where
> > sucessful systems traders most likely must account for the limits of
> > both humans' cognitiion and emotion and systems' "domain drift" to
>
> What's wrong with an automoated system?
>
> Anything that a human can do following some heuristics a computer
> program can do.
>
>
> >
>
> --
> Regards, Mark
> /\/\/\/\/\....I love humanity. It's people I can't stand...../\/\/\/\/\
> ==-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-==
> hubeyh@... =-=-=-=-=-= http://www.csam.montclair.edu/~hubey
>
> ------------------------------------------------------------------------
> Click here for savings: beMANY!
> http://click.egroups.com/1/4115/5/_/_/_/962758444/
> ------------------------------------------------------------------------
>
> To unsubscribe from this group, send an email to:
> Behavioral-Finance-unsubscribe@egroups.com
>
>
>
>
>

jk_stratton@... wrote:
>

> 2. But if there's a lot of money out there trading off systems - and
> their is - at some point that has to limit the available
> opportunities for systems traders. Nothing exceeds like success,
> especially in a zero-sum game like futures markets, where successful
> speculators in the final analysis make their money off of
> unsuccessful speculators and utilitarian traders.

It is that way at the top in all human endeavors. Isn't it?

There can only be one numero uno in every field. It just
happens that the competetion reduces to fighting over minute
differences in ability.


--
Regards, Mark
/\/\/\/\/\....I love humanity. It's people I can't stand...../\/\/\/\/\
==-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-==
hubeyh@... =-=-=-=-=-= http://www.csam.montclair.edu/~hubey

-----Message d'origine-----
De : jk_stratton@... <jk_stratton@...>
À : Behavioral-Finance@egroups.com <Behavioral-Finance@egroups.com>
Date : mercredi 5 juillet 2000 00:36
Objet : [Behavioral-Finance] Re: Restatement of ( Will a computer program
ever be superior to humans in trading?)


>Arguing with PG for the hell of it :)
>
Taken in my own game :)

>First (please see below), the game has gotten to the point where
>sucessful systems traders most likely must account for the limits of
>both humans' cognitiion and emotion and systems' "domain drift" to
>compete successfully. A new spin on Keynes's beauty contest?
>
Having no real answer to that, I will get away just by confusing the issue
and answerint questions with other questions  :)))
Here it goes, I will call it  the acid test.
What will happen to successful system traders when the music stop ?
Well, I guess you will answer, rightly, what happen then to the systemless
traders ?
To what I will reply : and to the systemless traders that followed system
traders excesses and biases (vwith the help of some gurus) ?
As only future will tell.. here we gained both some breathing time before
giving definite answer about the beauty contest winners :)

>Here's what I think will happen: the market adjustment to systems
>trading overcrowding will not be smooth, but will be a sharp
>discontinuous process in which there will be a shakeout of the mass
>of systems traders, with a few players somehow adapting and riding it
>out and a few leaving the game to maybe come back later when the
>storm is over.
>
Well, supposing the market adjustment be violent, maybe system traders with
new kind of trading system will come. And new types of systemless traders
also.

-----Message d'origine-----
De : Ronald Davis, CMT <rondavis@...>
À : Behavioral-Finance@egroups.com <Behavioral-Finance@egroups.com>
Date : mercredi 5 juillet 2000 02:56
Objet : Re: [Behavioral-Finance] Re: Restatement of ( Will a computer
program ever be superior to humans in trading?)


>Let me know when you teach a computer to play high level bridge.

Except if it plays against other computers :)
Well Mark, I will go further. I think there is something more difficult for
computers to learn : to play low level, agressive, instinctive, fantasying
markets (as long they are still not completely in the hands of other
computers).
Old Wintel still did not invented the appropriate computer with its three
competing and always fighting central units : reptilian brain + right side +
left side of the cortex.
More seriously (or maybe less ?), I think system trading can be OK when the
market follows beaten tracks,
Because then, the system can play at the same time on the direction of the
track and its small autoregressive deviations.
The idea being that in those cases, individual biases either cancel out or
become predictable (as they become crowd biases going in a clear direction).
But when the market / the crowd change tracks... (as I said, that will be
the acid test)

PG

>Ronald Davis, CMT
>----- Original Message -----
>From: "H. Mark Hubey" <HubeyH@...>
>To: <Behavioral-Finance@egroups.com>
>Sent: Tuesday, July 04, 2000 17:37 PM
>Subject: Re: [Behavioral-Finance] Re: Restatement of ( Will a computer
>program ever be superior to humans in trading?)
>
>
>>
>>
>> jk_stratton@... wrote:
>> >
>> > Arguing with PG for the hell of it :)
>> >
>> > First (please see below), the game has gotten to the point where
>> > sucessful systems traders most likely must account for the limits of
>> > both humans' cognitiion and emotion and systems' "domain drift" to
>>
>> What's wrong with an automoated system?
>>
>> Anything that a human can do following some heuristics a computer
>> program can do.
>>
>>
>> >
>>
>> --
>> Regards, Mark
>> /\/\/\/\/\....I love humanity. It's people I can't stand...../\/\/\/\/\
>> ==-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-==
>> hubeyh@... =-=-=-=-=-=
http://www.csam.montclair.edu/~hubey
>>
>> ------------------------------------------------------------------------
>> Click here for savings: beMANY!
>> http://click.egroups.com/1/4115/5/_/_/_/962758444/
>> ------------------------------------------------------------------------
>>
>> To unsubscribe from this group, send an email to:
>> Behavioral-Finance-unsubscribe@egroups.com
>>
>>
>>
>>
>>
>
>
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--- In Behavioral-Finance@egroups.com, "H. Mark Hubey" <HubeyH@M...>
wrote:
>
>
> jk_stratton@s... wrote:
> >
> > Arguing with PG for the hell of it :)
> >
> > First (please see below), the game has gotten to the point where
> > sucessful systems traders most likely must account for the limits
of
> > both humans' cognitiion and emotion and systems' "domain drift" to
>
> What's wrong with an automoated system?
>
Tell me what I said that gave that idea, please.

> Anything that a human can do following some heuristics a computer
> program can do.
>
People have made similar arguments for the potential of AI; maybe
they'll prove right. But it's not the point here as I see it with
systems trading, where it's the performance that important, not the
process of it. A dog runs and plays frisbee differently than a human.

Jan

--- In Behavioral-Finance@egroups.com, "H. Mark Hubey" <HubeyH@M...>
wrote:
>
>
> jk_stratton@s... wrote:
> >
>
> > 2. But if there's a lot of money out there trading off systems -
and
> > their is - at some point that has to limit the available
> > opportunities for systems traders. Nothing exceeds like success,
> > especially in a zero-sum game like futures markets, where
successful
> > speculators in the final analysis make their money off of
> > unsuccessful speculators and utilitarian traders.
>
> It is that way at the top in all human endeavors. Isn't it?
>
> There can only be one numero uno in every field. It just
> happens that the competetion reduces to fighting over minute
> differences in ability.
>
I don't see it that way. I think there's a misunderstanding here.
When I say futures markets are a sum game zero, I mean that strictly
in arithmetic. Futures markets are a means of risk transfer like
insurance, where wealth isn't created, it's transfered. So, if youre
speculating in a commodity, your profits come from assuming risks of
the trade (commercial producers/users who are there to hedge) at
favourable odds and/or unsuccessful speculators.

BTW, who's the #1 accountant?

Jan

Gord and others, Sounds an awful lot like a variant of the Prisoner's Dilemma.
And we know how many strategies have been suggested in response to the
Prisoner's Dilemma.
Dick March

Gord Cruikshank wrote:

> You pose an interesting question, and the reason I replied with such a curt
> answer is this:
> Computerised trading systems are simply automated extensions of an
> individual's (or group's) trading philosophy.  Once the system is employed,
> it trades within the boundaries of the programmer's master plan.  Certainly
> there are "smart" systems such as neural networks and genetic algorithms,
> but they are very prone to overlearning.  This means they need "mothering"
> (human influence) to keep them pointed in the proper direction.
>
> Now, imagine for an instant that tomorrow every trader on earth turned over
> their trading style to a computer.  For a very short time (maybe measured in
> hours or perhaps days) the market would become efficient.  However, as soon
> as one of those traders changed their algorithms, an adjustment would take
> place.  Still efficient?  Not likely, since most traders are looking for
> some sort of edge.  Perhaps someone implements an automated news reader or
> email reader service into their automated trading system.  See where this is
> heading?  Eventually there is a return to the market model we use today.
>
> Furthermore, an interesting postulate is: once all traders are "automated",
> wouldn't many of the patterns (i.e. head and shoulders) become overtraded
> and perhaps insignificant?  Maybe even destructive?
>
> You pose a question which I have had to answer many times.  The interesting
> thing is that there is no specific answer...just theories.  ...very
> interesting theories.  I shall watch this thread closely.
>
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