The Problem With Financial Oracles

Machine learning in finance

In recent years, machine learning techniques and big-data facilities have become quite popular in the finance and investment world. In the wake of this success, numerous machine learning researchers have decided to found their own asset management companies, hoping to capitalize on this trend.

This begs the question: Are large amounts of data and computing power all that is needed to tame the markets? In this article we delve into the uses and misuses of machine learning (ML) in finance.

The two kinds of machine learning

To the neophyte, all ML might look like the

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Profits, prophets and pseudoscience

Market prophets

We have all seen articles on financial news sites confidently predicting the future of various markets, often with remarkable specificity. Here are some that have appeared just in the past few weeks (as of 5 November 2018):

The stock market is setting up for another rally, according to Elliott Wave theory. Market strategist urges aggressive buying, says bull market could last decades. Short-seller who warned of ‘unavoidable pain’ earlier this year turns bullish. Stock strategist who saw market correction now predicts 10% to 14% rally — and a fizzle in 2019. Why the Dow Jones Industrial Average

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