Crashes and Meltdowns
The fun thing about the practice of statistical investing is it proves without question that a) God exists and b) he fucking hates me.
I can tell, because the moment I invest in anything using a robust statistical algorithm the market goes apeshit crazy. Robust algorithms are simple and are weakly dependent on the parameter values. My current algorithm has three parameters--two thresholds and one time range--and it isn't enormously sensitive to any of them.
Because the strategy I use with this algorithm is insanely risky, I only play with about 1% of my portfolio, which turns out to be a good thing.
That last time I tried something like this the Flash Crash occurred three days later.
This time a major earthquake hit Japan.
I will, of course, stick with it, because statistics tell us that we can't be unlucky every single time. But the next time I try it I feel like I should warn people, because it is quite likely to case an asteroid to hit the planet or something similar. Anything to make the market drop like a stone when it is statistically poised to rise.
And on the other hand, Lord Rothschild famously said the time to buy was when blood was running in the streets. Japan is a long way from that, but there may be a buying opportunity in there somewhere...
I can tell, because the moment I invest in anything using a robust statistical algorithm the market goes apeshit crazy. Robust algorithms are simple and are weakly dependent on the parameter values. My current algorithm has three parameters--two thresholds and one time range--and it isn't enormously sensitive to any of them.
Because the strategy I use with this algorithm is insanely risky, I only play with about 1% of my portfolio, which turns out to be a good thing.
That last time I tried something like this the Flash Crash occurred three days later.
This time a major earthquake hit Japan.
I will, of course, stick with it, because statistics tell us that we can't be unlucky every single time. But the next time I try it I feel like I should warn people, because it is quite likely to case an asteroid to hit the planet or something similar. Anything to make the market drop like a stone when it is statistically poised to rise.
And on the other hand, Lord Rothschild famously said the time to buy was when blood was running in the streets. Japan is a long way from that, but there may be a buying opportunity in there somewhere...