It’s time for OpenAI to enter financial markets

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Source: Cineramble

Robinhood started with noble intentions. To steal from the rich and give to the poor. Unfortunately, like many tales of good intentions, the truth isn’t as appealing as myth. I’m talking, of course, about the trading app, not the historical figure.

Ultimately, however, Robin Hood was quite possibly used as a stock alias for thieves. The moral of the story is that we shouldn’t allow names, myths, and folklore to distort the underlying reality. In this case, that thieves can pretend to be men of the people.

And Robinhood is certainly a financial thief, of the legal sort.

Robinhood started with a fairly radical idea: to allow anyone to buy or sell stocks commission free- $0.00 for any purchase or sale of financial instruments, including options, no questions asked. Traditionally, customers have had to pay $5–$10 every single trade. …


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Source: Multpl, Shiller Cape PE

Robert Shiller is a Yale economist who won the Nobel Prize in 2013 for his empirical work on asset pricing. He’s pioneered work in behavioral finance and narrative economics and is well renowned for correctly predicting the stock market crash of 2008.

The above chart is based on Shiller’s CAPE price earnings ratio. This ratio adjusts for inflation and business cycle variations. According to the CAPE ratio, the market is currently more highly valued than during Black Tuesday. The only time the market has been more highly valued was during the dot com boom. …


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Thanks to J.J. Pryor for the inspiration.

What is the economic theory of everything?

Is it too simple to call it ‘transactions costs’? Not at all. Think of the following simple example. I promise you that even the most skilful and manipulative salesperson is unlikely to convert every person to their product. Let’s say that 100 people buy the good but only 100 people decide to buy the right. How is that possible? All the ‘close’ meetings and persuading of the majority of the buying population just cost too much and eventually the project is not launched.

Not a bad response! Transaction costs are certainly integral to many economic theories, going back to even before Coase’s theorem. …


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Individuals will generally vary from one another in many attributes, not just income. Let us suppose that individuals are generally heterogeneous in their inclinations, complex in their motivations, occasionally whimsical in their choices, and susceptible to a variety of social influences.

— Anwar Shaikh, Rethinking Microeconomics: A Proposed Reconstruction

Typically in an economics course, one starts with a utility maximization individual, then derives a market demand curve by aggregating, sometimes even using an “representative agent”.

However, as Anwar Shaikh points out, “But it does not follow that individual decision making is characterized by the rules of so-called rational choice and rational expectations or by the reductive incentives they embody. Nor does it follow that aggregates can be analyzed in terms of representative agents. …


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Source: Britannica

Economics is traditionally defined as the study of the allocation of scarce resources which have alternative uses. Microeconomics is further defined as the study of individual decision making, or of supply and demand, price theory, market design, and so on. Macroeconomics is defined as the study of aggregative economic phenomenon, national accounts, GDP, fiscal and monetary policy.

In some sense, economics can be called the science of scarcity. …


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TLDR: There are three ways to get some extra trades in. 1. Trade in a cash account. 2. Trade the VXX and other hedges (like GLD and BND) and hold overnight. And 3. Trade options and quasi-close out same day.

According to the SEC, “FINRA rules define a pattern day trader as any customer who executes four or more “day trades” within five business days, provided that the number of day trades represents more than six percent of the customer’s total trades in the margin account for that same five business day period.”

So, one way to avoid day trading restrictions is to only use 6% of your trading balance (technically, total trades, not balance). $1000*.06 = $60, yeah, not going to happen. Otherwise, you need $25k in cash… Yeah, not going to happen for most of us. …


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(November 1st, 2020 10:30PM) Our first chart goes back to 2012. From 2012 to 2016, there’s a support/resistance channel that, extended to today, would give a fair value range for the Dow Jones of 21250 to 27250. For reference, the Dow currently sits at 26445.

There’s nothing objective about this range that really makes it a “fair value”, other than it was a strong range for 4–6 years and much of 2018–2019 was spent overvalued relative to it.

Reasons for bearishness include election uncertainty, potential tax hikes from a Biden administration, a resurgence of Covid cases, a potential lockdown, and uncertainty regarding recovery trajectory. …


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William Poundstone has an excellent book called The Doomsday Calculation, where he discusses various versions of the doomsday argument. However, in his book, he claims that the doomsday argument is incompatible with the simulation hypothesis. I believe he is incorrect, and hence the purpose of this post is to argue that the doomsday argument and the simulation hypothesis are not mutually exclusive.

Let’s start with the doomsday argument (DA). DA is based on something called the Lindy effect. “The Lindy effect is a theory that the future life expectancy of some non-perishable things like a technology or an idea is proportional to their current age, so that every additional period of survival implies a longer remaining life expectancy. …


You cannot “know” the market price without first affecting it

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Source: Trading View

The Heisenberg uncertainty principle states that you cannot know both a particle’s position and momentum at the same time. This is not simply due to measurement error; it is a fundamental law of physics due to the fact that the very act of measurement affects the particle’s position or momentum.

We can apply similar logic to stock prices. While a stock chart typically looks like a smooth, continuous graph, this is merely an average over a time period looked at in hindsight. …


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Ashley Hodgson, Prospect Theory: An Overview

Your PhD thesis was “Essays on the Evolution of Healthcare Technology.” In particular, you looked at 3 empirical case studies of how government policy and supply side factors can impact technological diffusion. First, you find that Medicare’s prospective payment system results in fewer innovations for elderly patients compared with non-elderly. Second, you found how new procedure codes cause “sudden jumps” in the number of procedures performed per quarter. Finally, you look at how some supply side factors like physician per capita density affects new ADHD drug geographic diffusion.

How long did it take you to write your thesis? What classes inspired your research? How did you develop your model and how did you gain the statistical skills to do your empirical work? …

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The Moral Economist

Thoughts on Economics, Politics, Philosophy, Ethics, and Computing by Adam Smith Reincarnated as Walter Morawa

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