
Quants Think Like Amateurs in China’s Wild Stock Market - jbredeche
https://www.bloomberg.com/news/articles/2019-05-15/quants-think-like-amateurs-in-the-world-s-wildest-stock-market
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lawrenceyan
Also because the Chinese government has direct control over the stock market,
and can make arbitrary changes at any time. Makes things pretty difficult when
the entire market is literally just a giant chop shop.

It amazes me that any Chinese investor would willingly invest in the market to
be honest, but I suppose that’s why alternative investments like
housing/cryptocurrencies are so popular.

~~~
devoply
The question for a real investor in a stock market is, is it going up or down
over a 10 year period or if it's a company the same thing applies in a period
of 10 years is it going up or down. Outside of that in any stock market you
are gambling.

~~~
lawrenceyan
Even if you take the long view, I’m not sure how much faith you can really put
into the Chinese market. Authoritarian governments as shown by past history,
don’t have a great track record for long term stability unfortunately.

Who knows though, maybe the Chinese government will manage to make a smooth
transition towards a more democratic system without the violent revolutions
that previous incarnations have had to deal with respectively.

Now is probably a critical moment in determining whether such a future
scenario is realistic, considering the slowing economic growth of China and
the need to transition towards a service oriented rather than manufacturing
based economy. Economic recession is usually one of the first steps towards
civilian revolt in authoritarian regimes.

~~~
outlace
Most governments in history were authoritarian and many were stable for
hundreds of years. With modern technology, I don’t see why authoritarian
governments are necessarily more vulnerable than democratic ones.

~~~
barry-cotter
> Most governments in history were authoritarian and many were stable for
> hundreds of years.

There are currently two state level organisations over 1,000 years old,
Japan’s Chrysanthemum Throne, aka the Imperial Household and the Holy See or
Papacy. The only other state to break 1,000 years I’m aware of was the Most
Serene Republic of Venice. State continuity is an extremely hard problem, and
I don’t see much evidence that monarchies were stable. Succession disputes and
civil wars are really common in republics, monarchies, empires, everything.
Democracy’s virtue is in simulating a civil war by counting heads and
facilitating an orderly and peaceful transfer of power between groups that
detest each other. When the hate gets too much then you get a civil war.

Authoritarian governments have the problem that the Western bloc is implacably
opposed to their existence and will take any opportunity to extinguish them.
Look at what happened to Libya after Qaddafi cooperated and dismantled the
chemical weapons programme and did that help him? Hell no. Hilary Clinton
gloated over his death after she persuaded Obama to destroy the only Libya.

This is not the only time the US has opted to spread its values at the expense
of countries that had no quarrel with it. The US sent the Flying Tigers to
Burma well before Pearl Harbor, and knew perfectly well that the oil blockade
of Japan was an existential threat to the Empire of Japan. Likewise the US got
into WWI and WWII because it wanted to. The US was shipping aid and supplies
to the U.K. The sibling of the Lusitania was hardly an unforeseen consequence
of supporting one side in a war.

China is well aware of this, or at least the Politburo and the rest of the top
level cadres in Zhongnanhai are. The West is inimical to their existence.
Ditto the North Korean leadership. The US is totally untrustworthy as far as
they’re concerned.

More broadly apart from the Holy See and Chrysanthemum Throne the countries
that have gone the longest with continuity of government and sovereignty are
the USA and U.K. The US is due for another civil war, people certainly hate
each other enough and the UK’s claims to governmental continuity have a huge
asterisk called the Glorious Revolution or Dutch invasion.

~~~
dragonwriter
> There are currently two state level organisations over 1,000 years old,
> Japan’s Chrysanthemum Throne, aka the Imperial Household and the Holy See or
> Papacy.

The Holy See hasn't actually been either stable or a state level organization
continuously for the last thousand years.

~~~
barry-cotter
When wasn’t it? During the Avignon captivity it was at least as powerful as
now. Between Italian unification and the Lateran Pact it had diplomats with
the customary immunity, embassies and ability to make treaties. The Holy See
has had rival claimants since 1,000 but the current pontiff derives in a
direct line from that of 1,000 AD just as the current British government has a
rock solid claim to continuity since the Glorious Revolution.

~~~
dragonwriter
> When wasn’t it?

Well, it didn't even become a “state level organization” until the temporal
dominions of the papacy became separate from the Holy Roman Empire in 1177, so
even if you ignore both times the papal states were disestablished, it doesn't
reach 1000 years.

> The Holy See has had rival claimants since 1,000 but the current pontiff
> derives in a direct line from that of 1,000 AD

Only in the sense that a convention later grew of describing a particular line
through the period of two and then three competing lines of popes that were
ended with a common replacement as “the” line of popes, but that's an after-
the-fact rationalization, not actual continuity.

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AFascistWorld
[https://finance.yahoo.com/quote/300431.SZ/](https://finance.yahoo.com/quote/300431.SZ/)

A third tier media player software company with an antique main product when
listed, reached a high of 327 rmb in three months, then the company started
it's VR glasses business.

[https://finance.yahoo.com/quote/300104.SZ/](https://finance.yahoo.com/quote/300104.SZ/)

LeEco, founder absconded to the US, about to sink his FaradayFuture too.

[https://www.bloomberg.com/news/articles/2019-04-30/kangmei-s...](https://www.bloomberg.com/news/articles/2019-04-30/kangmei-
slumps-after-revising-2017-cash-holdings-by-4-4-billion)

Oops, 30 billion rmb profit in cash accounting error boys.

[https://www.google.com/search?q=600485.sh](https://www.google.com/search?q=600485.sh)
Yes that guy who trumpeted to actually dig The Nicaraguan Canal. Trading
suspended ever since December 2016, when a news report accuses its main
business, telecom in Cambodia which rocked a 80%+ net profit margin, is a
fraud. It seems no one dares to mess with this company right now, rumored to
have deep military connections.

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ilamont
If developing profitable trading approaches based on message board and social
media sentiment, will it work outside of China in those markets where small
investors and day traders dominate - penny stocks, certain cryptocurrencies,
etc.?

~~~
synaesthesisx
Yes - in fact many people do this regularly...for instance, identifying and
shorting pump and dumps (usually popular penny stocks).

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0898
My favourite part of this article:

"He became interested in the challenge in part because of some quirky moves in
Chinese stocks in the wake of the 2016 U.S. presidential election."

"When the result became clear, a listed Chinese company whose name sounds like
“Trump Wins Big’’ in Mandarin surged, while a firm that sounds like “Aunt
Hillary’’ slumped."

~~~
sabujp
i had to read that a couple of times to understand the implications, are
people really that dumb?

~~~
tanderson92
Yes, and it's a worldwide phenomena. Embedded in this link is Thaler (A Nobel
winner) using such an example as a counterexample to one view of the efficient
markets hypothesis: [https://ftalphaville.ft.com/2017/10/09/2194613/thaler-
the-cu...](https://ftalphaville.ft.com/2017/10/09/2194613/thaler-the-cuba-
fund-and-the-emerging-markets-hypothesis-plus-a-roundup/)

tl;dr price for the "CUBA fund" spikes following Obama announcement of
normalizing relations, despite the CUBA fund having nothing at all to do with
CUBA.

~~~
p1necone
The efficient markets hypothesis seems Really Fucking Dumb™ to me. Like,
trivially nonsense.

~~~
foldingmoney
The EMH isn't necessarily that every stock is perfectly priced. It's that it's
not possible to reliably predict where prices will go next.

~~~
p1necone
But isn't the hypothesis that it's not possible to predict _because_ it's
perfectly priced already?

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nemoniac
To use the title of Dan Ariely's book: Predictably Irrational

