I’ve taken an interest in the stock market lately. Not really sure where it’s originating from – it’s not like I have a load of cash to throw at such things. Even so, I’ve been using a couple of simulators and just learning about what’s involved. I’m also reading a few books – Contrarian Investment Strategies and A Random Walk Down Wall Street. Both of them have appealed to the pragmatic programmer in me – but they’ve also surprised me. Chief among those surprises is that neither the technical (chart-based) analysis nor fundamental analysis (i.e. studying a company’s financial statements) are as effective as one might imagine. When you consider how often charts/plots of stock prices are encountered in most people’s exposure to the market, it’s jarring to be told that those charts are pretty useless for any meaningful predictions.
Ultimately, all of my reading has reinforced my belief that humans are extremely poor information processors – at least when it comes to correlation of multiple variables. We like our data fed in sequentially, not in parallel. Furthermore, we (at least, most of us) build judgements about data iteratively, so it’s easy to find relationships between previous variables and current information where no such pattern exists. So, we need computers; more critically, we need to learn how to teach computers to do the parallel correlation for us.
At least, that’s my $0.02. :)