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Analogies of a Stock Market in a Highly Noisy World
What are we looking at when we look at these graphs?
We’re both looking at a picture of numbers.
While we both look at the same picture, we won’t see the same things. You, for instance, might try to order them. I might try to pick the ones that are divisible by a smaller natural number.
We will have different ideas about organizing the noise.
When it comes to stock markets, it’s not important to us whether it’s efficient or not. It’s important whether you can rule out if it is perfectly efficient. I think most of us can agree that efficiency in the markets is a sliding scale, given that equities markets crash and skyrocket without real rhyme or reason.
Equities crashing or skyrocketing is also not important to us. What is important to us is that we see the reasons, in that picture, for those equities to sway a particular direction. It won’t need to be insane dips or jumps in valuation.
In November of 2000, Jim Simons said this:
“We search through historical data looking for anomalous patterns that we would not expect to occur at random. Our scheme is to analyze data and markets to test for statistical significance and consistency over…
