Is the stock market "zero intelligence"?

A scientific simulation shows this: random software for buying / selling stock values ​​would obtain the same results as real traders.

The case comes to us from the Santa Fe Institute in New Mexico, in Professor Doyne Farmer's research unit. Curious researchers: they designed a software for buying / selling stock values, redacted from all rational, economic and financial data, in short, random. "Zero intelligence," they say. They tested it on the London Stock Exchange, on 11 stocks, for 21 months, or 6 million buy and sell orders.

As a result, the insane software reproduces the real market with a precision between 76 and 98%. As if, basically, the Stock Exchange was driven by idiots, blind or rolling the dice.

Stock market values

Of course, this is not the case. Traders do not operate at random. So what is the explanation? According to Doyne Farmer, market movements depend less on broker strategies than on the structure and constraints of the system itself. A spokesperson for the London Stock Exchange readily agrees: “It's an interesting little piece of work that reflects what we see for ourselves. "

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We know what influence the stock markets have taken over our lives. First for the carriers, of which it is a source of income, but also for investments, for employment and for the general atmosphere in our societies. We know that social plans now no longer depend only on the smooth running of a business, but on the level of greed of invisible shareholders. We learn here that the system generally obeys a "zero intelligence". Welcome to the crazies.


Source: NovaPlanet

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