

The New Stock Market: Sense and Nonsense - dsri
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2580002

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acconrad
This paper explains the exploitations of High Frequency Trading and it's
effects on the stock markets of today. The authors are from Columbia Law
School and Columbia Business School - The B-school being one of the top
business schools for investing specialists (particularly value investing).

If you've read _Security Analysis_ or _Intelligent Investor_ by Benjamin
Graham (also from Columbia), this shouldn't concern you. Even the conclusion
from the paper is that "there is no emergency requiring immediate, poorly-
considered action." The day-to-day micro trades of a HFT firm bear little
consequence to the long-term performance of a security. What should concern
you is Mr. Market[1]. Mispricing of securities (i.e. from a poor earnings
report, sell from an instituitional index fund because it dropped from a large
cap to a mid cap, etc.) and the inefficiencies of irrational trades create
opportunities for investors, even for the individual investor.

In a bull market like our current one that is going over 6 years strong, it's
hard to find that value (and even then, if you don't have time to learn
investing, you're still best off holding a broad, low-cost, tax-efficient
index funds in stocks and bonds), but it still exists. And it's not being
exploited by HFT or Institutional pollution. You just have to know where to
find it.

[1] [http://www.investopedia.com/terms/m/mr-
market.asp](http://www.investopedia.com/terms/m/mr-market.asp)

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Rainymood
Good post. I am currently writing my seminar paper on NLP (Latent Dirichlet
Allocation) in regards to quarterly earnings reports and stock price :) good
stuff.

Just remember this: "The market can stay irrational longer than you can stay
solvent."

