Formula for Disaster

The New York Times discusses the growth of trading financial assets by mathematical formulae. This type of trading can potentially overwhelm markets — something the article does not mention.

Duhigg, Charles. 2006. “A Smarter Computer to Pick Stocks.” New York Times (24 November).

“Studies estimate that a third of all stock trades in the United States were driven by automatic algorithms last year, contributing to an explosion in stock market activity. Between 1995 and 2005, the average daily volume of shares traded on the New York Stock Exchange increased to 1.6 billion from 346 million. But in recent years, as algorithms and traditional quantitative techniques have multiplied, their successes have slowed.”

4 comments so far

  1. Mike B) on

    Maybe this is what Hawking is talking about when he speaks of the possibility of computers taking over as the dominant “species”.

  2. Jim Devine on

    so what good are the speculators, if the computer programs do all the work?
    JD

  3. mperelman on

    Speculators are needed to cash the checks.

  4. JK Fowler on

    Hi there. Thought you might be interested in this: http://jkfowler.com/2009/11/10/midnight-trade/ . Cheers, JK


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