'Dumb money' chase: In the world's wildest stock market, experts are trying to think like amateurs

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In the world's wildest stock market, experts are trying to think like amateurs

Tom Zhou runs a $US500 million hedge fund and has degrees in civil engineering, economics and finance.Like other quantitative trading whizzes attempting to make sense of China's $US6.6 trillion stock market, Zhou spends much of his time trying to think like a novice investor.

While quants are typically loath to give away details of their approach, a few were willing to share the broad outlines of how they model the impact of China's individual investors on the nation's stock market. BlackRock, the global investing behemoth that has big plans to increase its presence in China, tracks changes in retail-investor sentiment by analysing social media data, including about 100,000 chat-room posts a day on websites like Eastmoney.com and Xueqiu.com. The firm buys stocks that attract growing attention from investors and sells those that show waning interest.

China's censorship of social media – and the constantly evolving online slang that netizens use to evade official monitors – can also present challenges for firms using AI tools like natural language processing to monitor investor sentiment.The median return among funds linked to China's CSI 300 Index beat the benchmark by 3.63 per cent in 2018, according to Citic Securities. In the first quarter of this year, the funds underperformed the benchmark by 3.22 per cent.

 

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These dumb a**es are just gambling. No algo can predict their pattern because even they have no idea what they’re doing. Red or black, that’s all that matters. And the house always wins.

...this is called gambling; the stock market ceased t exist some time ago - all that remains are horses to bet on...what a joke...

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