Big data market prediction


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  • I like your Big Data presentation.
    I would like to share with you document about application of Big Data and Data Science in retail banking.
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  • Thanks Bernard for sharing.
    IMHO Sentiment Analysis is embeded in the trading itself and can't be considered not even as a soft input (unluckily...). Stocktwits make humans think they can equal the automation (real time info vs real time trade). I think we are moving away from a commoditized fundamental analysis since available information grows much faster than our ressources as individuals to crunch it seamlessly.
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Big data market prediction

  1. 1. What Will The Stock Market Do? Big Data Powering The Future Of Prediction Copyright Bernard Lunn @bernardlunn 2010
  2. 2. What Will The Stock Market Do, Mr. Morgan? “It will fluctuate” Copyright Bernard Lunn @bernardlunn 2010
  3. 3. Your Parents Recent Past Today High Frequency Trading Microseconds, maybe seconds Days, maybe weeks Momentum Trading Fundamental Investing Years, maybe decades Warren Buffet Couple of techies in New Jersey Hedgies & Day Traders Buy cheap stocks, hold “the trend is your friend” “latency arbitrage” Copyright Bernard Lunn @bernardlunn 2010
  4. 4. The Automated Insight Funnel: Past Market Prices Models Alerts “know the price of everything and the value of nothing”Copyright Bernard Lunn @bernardlunn 2010
  5. 5. Meanwhile In An Office With A Ton Of Paper…. Fundamental Value Models But Beware The “Value Trap” Cut & Paste From SEC Documents Copyright Bernard Lunn @bernardlunn 2010
  6. 6. The Automated Insight Funnel:Near Future Market Prices Models Alerts The Commoditization Of Fundamental Analysis Will Bring Back Value Investing (Until Automation Squeezes The Arbitrage Gap) Fundamentals Via XBRL Copyright Bernard Lunn @bernardlunn 2010
  7. 7. Predicting the future is a ridiculous idea, best left to science fiction writers Copyright Bernard Lunn @bernardlunn 2010
  8. 8. Copyright Bernard Lunn @bernardlunn 2010
  9. 9. in in becomes Complex Systems such as the weather can seem chaotic Copyright Bernard Lunn @bernardlunn 2010
  10. 10. in in becomes Complex Systems such as the financial markets can seem chaoticCopyright Bernard Lunn @bernardlunn 2010
  11. 11. Brief History Of Weather Forecasting • 1.0: farmers & sailors interpret local signs • 2.0: primitive systems that Eisenhower had to rely on before calling the date for the Normandy Invasion • 3.0: computer systems that can predict the weather in the next hour but take 2 hours to do all the calculations • 4.0: reasonably accurate Copyright Bernard Lunn @bernardlunn 2010
  12. 12. Why These Are Interesting Times 1. Massive cheap or free data sets available online 2. Massive, cheap computational power available online Copyright Bernard Lunn @bernardlunn 2010
  13. 13. The Automated Insight Funnel:Longer Term Future Market Prices Models Alerts Traders Live On Numbers XBRL Turning Text Into Numbers Copyright Bernard Lunn @bernardlunn 2010
  14. 14. 3 Current Techniques 1. Sentiment Analysis 2. Finding the fundamental pin in the haystack 3. Faster macroeconomic trend data Copyright Bernard Lunn @bernardlunn 2010
  15. 15. Turning Sentiment Analysis Into A Tradable Number • “What is the herd thinking”? • We are still years away from the 80% accuracy needed as an input to decision-making • At best this is a “soft” input (important for branding but weak for trading) Watch: Stocktwits Copyright Bernard Lunn @bernardlunn 2010
  16. 16. Finding The Fundamental Needle In The Haystack • Real use cases • signs that a company is about to default • signs that a consumer product is about to explode • This is very hard to do accurately • But the pay-off is big & fast Watch: First Rain Copyright Bernard Lunn @bernardlunn 2010
  17. 17. Faster Macroeconomic Trends (employment, consumer spend) • Current system is broken • quarterly lag • small sample • Huge payoff • The data is there, the algorithms are missing Watch: ADP, Intuit, New StartUps Copyright Bernard Lunn @bernardlunn 2010
  18. 18. 3 Ways To Profit From This 1. Package & Sell Research 2. Trade on your proprietary data 3. Sell tools to the above 2 Copyright Bernard Lunn @bernardlunn 2010
  19. 19. Warren Buffet’s World Is Changing • The Newspaper As Toll Booth Theory Worked…..Until It Stopped Working • You cannot analyze Google Or Apple the same way you analyze Dairy Queen or Coca Cola • Google, Apple & other high value stocks are complex, real time adaptive ecosystems Copyright Bernard Lunn @bernardlunn 2010
  20. 20. Some “Eternal Verities” Remain • Check the weather forecast….but also expect the unexpected • Build good ships (choosing the right investing theme & building good models) • and trust in good sailors (invest in good management teams)Copyright Bernard Lunn @bernardlunn 2010