39
votes
Accepted
Why are there no papers about stock prediction with machine learning in leading financial journals?
I think you're overlooking a third explanation:
Nobody that found a successful technique to generate alpha has published it. I can think of the following causes:
If you're an academic, why share your ...
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32
votes
Why are there no papers about stock prediction with machine learning in leading financial journals?
In the early 2000s I met the Quant Team at Barclays Global Investors in San Francisco and I tried to convince them to submit some of their research to the journal I was managing at the time, ...
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25
votes
Why are there no papers about stock prediction with machine learning in leading financial journals?
There are very many finance papers using machine learning
One the of the top finance journals is the Review of Financial Studies (RFS). You find 87 published and peer-reviewed papers if you look up ...
- 16.4k
10
votes
Accepted
Does the existence of anomalies disprove the efficient markets hypotheses?
If one finds an anomaly relative to some asset pricing model, there are three possibilities:
The anomaly you "found" actually isn't there: you're overfitting the data, found a spurious result.
The ...
- 7,024
10
votes
Does AI-based trading assume efficient market hypothesis?
Most traders that I know have a complex relationship with the Efficient Markets Hypothesis, difficult to summarize.
You could say that they accept a "soft version of EMH" but not the ...
- 11.8k
8
votes
Accepted
Why do anomalies disappear after they get detected?
The best explanation I have seen so far is the so-called Adaptive Market Hypothesis by Andrew Lo:
The adaptive market hypothesis, as proposed by Andrew Lo, is an
attempt to reconcile economic ...
- 27.7k
8
votes
Why are there no papers about stock prediction with machine learning in leading financial journals?
Adding to the answer of @BobJansen there are some additional worries with complex machine learning models (eg. Neural Networks of any kind and complex tree-based approaches) that you can encounter, ...
- 4,921
7
votes
What mechanisms does the market use to brining an asset back to the market line, as defined by CAPM?
Supply and Demand
That's a great question and your question has a simple answer. @Daneel showed you the ``maths'' behind it.
It boils down to: if an asset has too high returns than the CAPM predicts, ...
- 16.4k
7
votes
Why are there no papers about stock prediction with machine learning in leading financial journals?
Was debating if I should even comment on this but then thought tonight I'm gonna have myself a real good time.
JPMorgan Machine Learning in Financial Markets Conference, Paris 2019 offers a ...
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7
votes
What color financial time series are there?
Bonus question: Does anyone know how to play/hear a (financial) time series recorded as a pandas series, dataframe, python list, numpy array, csv/txt file,... ?
This is kind of fun and has practical ...
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6
votes
Accepted
If markets are efficient, why are most returns systematically high?
What you describe is known as the Equity Premium Puzzle - and it really is, as the name says, a real enigma:
"The equity premium puzzle (EPP) is a phenomenon that describes the anomalously higher ...
- 27.7k
6
votes
Accepted
Does the rise in passive investing make the markets less efficient?
On more than a few occasions, I have attempted to extrapolate the current trend towards passive allocation to its logical conclusion: more passive allocation means more inefficiency.
I am not aware ...
- 3,025
6
votes
Fama: Efficient Capital Markets: A Review of Theory and Empirical Work - are martingales incorrect?
The way I understand it is:
In equation 2 $x_{j, t + 1}$ is defined as the change in of $p_j$ over the period $t$ to $t + 1$. The formula says that the expectation of the change is zero which is the ...
- 8,620
5
votes
Why do anomalies disappear after they get detected?
Any anomaly that can be phrased as a "mispricing" or "relative value" opportunity can be expected to disappear as more people discover it and trade on it.
For example, say that stock movements over ...
- 5,971
5
votes
Accepted
Why exposure to the profitability factor increases investment premium?
As @skoestlmeier and @noob2 commented there's much research going on about the profitability anomaly.
Firstly, there are different ways of measuring profitability. Novy-Marx (2013, JFE) uses gross ...
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5
votes
Why are there no papers about stock prediction with machine learning in leading financial journals?
Because it would not work. There was a very old paper several decades ago (dont recall but think it was in an IEEE journal on information theory) that showed that the stock market is RANDOM within ...
- 59
4
votes
Why do anomalies disappear after they get detected?
Adding to the excellent answer of vonjd:
another, more cynical interpretation is that some of these "anomalies" never would have existed ex-post and that their discovery is the inevitable result of ...
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4
votes
Does the rise in passive investing make the markets less efficient?
First, you might find this recent paper by Israeli, Lee and Sridharan (Review of Accounting Studies, forthcoming) interesting. This is the abstract:
We examine whether an increase in ETF ownership ...
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4
votes
If markets are efficient, why are most returns systematically high?
Suppose markets are perfectly efficient and asset prices reflect all available information. Under this assumption one expects current prices to be non-biased estimators of future prices.
It is a ...
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4
votes
What mechanisms does the market use to brining an asset back to the market line, as defined by CAPM?
For simplicity let us assume we are considering a single investment period, that is from $t$ to $t+1$. Let $S_i(t)$ be the price of the asset $i$ at time $t$. Then the return of the asset between $t$ ...
- 8,229
4
votes
Why are there no papers about stock prediction with machine learning in leading financial journals?
tl;dr– People don't publish trade-secrets.
They're trade-secrets.
Stuff like effective market-prediction algorithms tend to be trade-secrets:
Trade secrets are a type of intellectual property that ...
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4
votes
Why are there no papers about stock prediction with machine learning in leading financial journals?
I'm sceptical about the story of the "silent genius" who has a fantastic quant model, generating him more money than he can spend.
The Nobel prize is waiting for you
It is highly of interest ...
- 686
3
votes
"Dusty Corners of the Market" and Limits-to-Arbitrage
What are some indicators that a given security might be inefficiently priced?
What about efficiently priced (i.e., how can we estimate the
degree of information already baked into price)?
You would ...
- 4,368
3
votes
Who benefits from more fair market?
You might find this paper interesting: "Does Finance Benefit Society?"
It's a very complicated question and in my opinion the above paper provides a nuanced answer.
- 1,074
3
votes
If markets are efficient, why are most returns systematically high?
We know that:
\begin{equation}
R_{t+1} = \frac{P_{t+1} + D_{t+1}}{P_t}
\end{equation}
After some algebra and taking logs we can write the returns as:
\begin{equation}
r_{t+1} = k + \rho (p_{t+1} - ...
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3
votes
Is it possible to build a computer model to simulate a market to prove whether efficient theory is true or not?
Let's begin from the start.
At its core, market efficiency is a statement about the compensation for risk embedded in asset prices. So, you can think of this issue as involving 3 quantities: (1) the ...
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3
votes
Why are there no papers about stock prediction with machine learning in leading financial journals?
I upvote @BobJansen's points; and add one small incremental observation.
Institutional investor scepticism about quant isn't so much scepticism about quant. It's more the fear that quant describes the ...
- 5,141
3
votes
Does AI-based trading assume efficient market hypothesis?
Using machine learning models (or other quantitative models) in trading does not necessarily assume the efficient market hypothesis. While some quantitative finance strategies may be based on the ...
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2
votes
Does the existence of anomalies disprove the efficient markets hypotheses?
I have a paper that argues that the distribution of returns cannot have a mean. I argue that prices are data and that returns are not data. Rather, returns are transformations of data. Therefore, ...
- 4,329
2
votes
Accepted
Do underlying assets have a no-arbitrage price?
Please see the papers below:
Sebastián A. Rey, Non-Arbitrage Valuation of Equities. International Journal of Financial Markets and Derivatives (2015) vol. 4, no 3/4, p. 231-245
http://www....
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