…is discussed in this nytimes article. I generally expect such approaches to become more common since computers are getting faster, machine learning is getting better, and data is becoming more plentiful. This is another example where machine learning technology may have a huge economic impact. Some side notes:
- We-in-research know almost nothing about how these things are done (because it is typically a corporate secret).
- … but the limited discussion in the article seem naive from a machine learning viewpoint.
- The learning process used apparently often fails to take into account transaction costs.
- What little of the approaches is discussed appears modeling based. It seems plausible that more direct prediction methods can yield an edge.
- One difficulty with stock picking as a research topic is that it is inherently a zero sum game (for every winner, there is a loser). Much of the rest of research is positive sum (basically, everyone wins).