

Experiment HN: Crowdsourcing Tech Stock Predictions - zackattack
http://www.zacharyburt.com/hn-crowdsourcing-stocks/

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joshu
The stock market is already a crowdsourcing platform. As is the options
market.

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leelin
True, but the aggregation function is a bit complex.

I'm curious where we'd wind up with something more transparent or democratic.

Sadly, we aren't able to make any beta-neutral or relative value bets!

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joshu
In what way do you think the aggregation function is "complex" or that it is
not transparent or democratic?

You are stating opinions as facts. Please back them up?

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leelin
Alright, I'll bite, but obviously we're hand-waving definitions on many
fronts.

I'll argue that equity markets are not good platforms for crowds to judge the
fair market cap of companies (or the NPV of cashflows). Most participants have
an incentive to maximize profits or preserve capital subject to some risk
appetite, and very few are actually interested in pricing companies; instead
participants are mostly interested in what they think the others players are
doing.

If we were to crowdsource what movies HN users enjoyed, that could work.
However, if we said that you would be paid for your vote only if you were in
the same group as the majority, then suddenly you aren't voting honestly...
you are trying to figure out how other people might vote, and our final result
is the aggregation of a lot of game theory (plus a few naive honest players
who get picked off by the rest of us).

Therefore, equity prices are not a democratic vote. Prices are not a weighted
sum of your vote times your conviction (nor are they your vote * conviction *
wealth). They can break down to a battle of speculators trying to outwit each
other and exploit any flaws in the market or others' thought processes.

D. E. Shaw Research recently set a record simulating a single protein molecule
in surrounding water for about 1 millisecond using first principles from
computational chemistry, and I suppose that means they have a long way to go
before fully modeling protein folding because the aggregation function of all
those forces are complex. However, I'd bet it would be much harder to
aggregate all the market participants and all their incentives from first
principles to step 1 millisecond forward in live trading time.

I'm not saying you can't make profits. Obviously people have for a long time
found relationships here and there that can predict future price movements.
I'm saying a formal aggregation model that would let us fully compute and
Turing-decide future prices, even if we had all the relevant inputs, seems
complex.

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joshu
Speculators continually enter and abandon the market. Without adding
information to the system, they just add volatility without driving the price
in any direction.

The price is thus the sum of people that know or believe something, weighted
by the resources the have to bear.

I'm not sure I understand why you need or want the price to be "democratic"?
What problem are you trying to solve here?

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drcode
Just to be fair to everyone entering things into this form: After you're done,
you don't get to see any aggregated predictions, only a "thank you" message
(which I found disappointing)

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zackattack
Fair enough.

I would appreciate it if nobody shares their predictions in this thread,
either. I know this isn't at all rigorous, but I'd still like to try.

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jbooth
These are mature stocks, which are basically a random walk, unless you have
some insider info.

What'd be really interesting would be if you got a couple thousand speculative
plays on there, and allowed people to only submit on the industries they knew
something about. Although that'd probably just lead to people only submitting
their pet stock as "going to the moon!"

Nice job in any case though.

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c1utch
Every statement you made is wrong.

1\. Every stock is a random walk. 2\. Insider info for smaller companies is
much more valuable then larger companies. 3\. Speculative plays would make
this even more boring, because then everyone makes wild guesses at the future
value of a company they have never heard of.

Nice job in any case though.

~~~
jbooth
Every statement you made was a complete misunderstanding of my statement.
Including the sarcasm, I was being genuine in my praise.

Briefly, the random walk factor is less of an issue for speculative stocks
because they either make it as a business, or don't. That's not a random walk.
And I really don't understand why you're so miffed.

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keyle
It's more an experiment on chaos theory and dart throwing than "Predictions".
I recommend you look at the fundamentals and aggregate the EPS forecasts in
relation to the ROE to get a better idea as to where they should be in a
year's time. On top of that you need to factor your economy and China's.

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zackattack
You seem to know what you're talking about. I hope you submit a prediction. I
doubt you will, though.

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keyle
You're right I won't. It's like trying to predict the next lotto numbers.

Fear and greed fuel the market in the short term, so even if you got close 2
days before the deadline, a scare in the market would throw off all your
predictions out the window.

All you can really predict is what you believe a stock will be worth
(intrinsic value) assuming the EPS forecast is fairly correct, the economy
behaves ok and that china doesn't cock up.

 _edit_ : I do appreciate anybody taking time to run an experiment though!
That's why I voted up your post.

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aantix
The biggest issue with this design is that there's no incentive to put in
effort for better predictions.

Take it to the next level; design this for Mechanical Turk
(<https://github.com/aantix/turkee>), and make this offer; for each prediction
received, get a nickel. If you're on the right side with your prediction,
receive an extra nickel. If you're within 0.5%, receive an additional nickel.

Not enough people utilize the "bonus" feature of Mechanical Turk as financial
incentive to increase the quality of data they receive. You don't have to pay
everyone the same. Reward better input.

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zackattack
the point is to see if the HN crowd is good at predicting, not random
people...

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puredemo
Make sure to tell me how I did in six months. ;p

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zackattack
I'll post a follow-up, but I'm not going to release people's individual
predictions publicly in case I inadvertently embarrass anyone. I'm probably
going to contact the winners individually to alert them of their insight and
luck.

But yeah, I'll post a detailed analysis in 6 months' time. If people then want
to contact me directly to get their data then they will be able to.

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slashcom
You should post aggregate values in a few days as well.

I hope you're also storing timestamps with the submissions. Just guessing, but
I'd bet any predictions made on 04/30 will correlate much better than those
made today.

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zackattack
One of the hard lessons I've learned is to try to put timestamps in every
table unless absolutely not necessary. :)

Edit: I'll post aggregate values to my blog in a few days' time.
zacharyburt.com. I'll cc the link to @zburt on Twitter.

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ary
Wasn't there just a story linked here the other day about the advice given to
the newly minted (back at the IPO) Google millionaires? As I recall it said;

Don't try to beat the market. Don't try to beat the market. _Don't try to beat
the market._

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trotsky
SELECT username, MAX(one_year) AS price_target FROM guesses GROUP BY ticker;

A cunning strategy to discover Mary Meeker's HN account name.

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Groxx
Somehow I don't think MSFT is $0.00.

Logged, with wild randomness. I don't pretend to understand chaos theory nor
astrology.

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strooltz
are you planning on removing blank entries (those set at 0.00). i, for one,
only filled out predictions who i actively follow in the market to keep
"uneducated" data from entering your prediction. maybe a good strategy would
be to remove the lower and upper ends of the curve as well...

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zackattack
thanks, yes, i am planning on tossing out obviously bad data.

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nandemo
However, 0.00 might be a valid guess. If I think Acme is going bankrupt soon,
then 0.00 is a good approximation for its future stock price.

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larrykubin
Some other popular sites with similar ideas are caps.fool.com and YC funded
socialpicks.com.

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kevinburke
Does everyone get an equal vote?

