Scientists Develop Financial Turing Test 184
KentuckyFC writes writes to share a new online test that is being touted as the "financial Turing test." The web-based exercise asks users to distinguish between real and randomly generated financial data. "Various economists argue that the efficiency of a market ought to be clearly evident in the returns it produces. They say that the more efficient it is, the more random its returns will be and a perfect market should be completely random. That would appear to give the lie to the widespread belief that humans are unable to tell the difference between financial market returns and, say, a sequence of coin tosses. However, there is good evidence that financial markets are not random (although they do not appear to be predictable either). Now a group of scientists have developed a financial Turing test to find out whether humans can distinguish real financial data from the same data randomly rearranged. Anybody can take the test and the results indicate that humans are actually rather good at this kind of pattern recognition."
Re:Not random and not predictable? (Score:5, Informative)
Economists ... (Score:4, Informative)
Various economists argue that the efficiency of a market ought to be clearly evident in the returns it produces.
The market is only efficient within a narrow range of economic activity. When economic activity exceeds the top and bottom ranges you get bubbles and panics - inefficient markets. We see them all the time.
I really wish economists would stop assuming that for any given economic activity, the conditions and their subsequent results can be extrapolated across the board. That's why, whether it's the Chicago school or the Keynesians, they can point to data (a selected portion of economic activity) that supports their view, when in fact all schools of economics is correct in their little slice of economic activity and conditions.
Re:Not random and not predictable? (Score:3, Informative)
Chaos Theory. Patterns in otherwise seemingly random outcomes. If you look at the details, for instance each snowflake, you'd come to the conclusion that each snowflake is unique (they are), however if you take a step back, you'll notice that the randomness of snowflakes becomes clear in that each snowflake conforms to a pattern that is apparent even as each snowflake is unique.
I know that this is a fairly poor explanation of chaos theory, so don't butcher me too much.
Re:Not random and not predictable? (Score:5, Informative)
A chaotic system is one where arbitrarily small perturbations always lead to arbitrarily large divergence in phase space. What this means is that even though a system might be following a completely causal underlying law of behavior, it still cannot be predicted because it would require having infinitely accurate knowledge of the parameters.
Because measuring apparatus always involves noise, and noise is of some finite value, this means that the arbitrarily small (yet IMPORTANT) perturbations cannot be resolved against the noise background. This places a very limited time window on your ability to make predictions.
Basic examples of this are the Lorenz attractor, the chaotic pendulum, etc.
Re:Economists ... (Score:5, Informative)
That's not market efficiency. In your example, the moviemakers would respond by making movies 19.99 globally, with the market failure of the Chinese not being able to afford movies.
Price discrimination* is a key part of economic efficiency when a monopolistic competitor** has control over their market goods. If the competitor sets prices without discrimination, this causes inefficiency because buyers (the Chinese) and sellers (the moviemaker) never get to trade, and market efficiency is defined as maximizing trade within the market.
* The market kind, not the racist kind.
** A monopolistic competitor refers to a competitor that has control over a narrow niche in a wide market, and is not the same as a monopoly.
Re:Not random and not predictable? (Score:5, Informative)
Re:Poker (Score:2, Informative)