Is the Stock Exchange “zero intelligence”?

A scientific simulation shows it: a random software to buy / sell stock market values ​​would achieve the same results as real traders.

The case comes to us from the Santa Fe Institute, New Mexico, in the research unit of Professor Doyne Farmer. Curious researchers: they designed a software for buying / selling stock market values ​​purged of all rational, economic and financial data, in short random. “Zero intelligence,” they say. They tested it on the London Stock Exchange, on 11 securities, 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 brokers' 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 job that reflects what we ourselves see. "

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We know what hold the stock markets have taken over our lives. First for the carriers, for whom 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 company, but on the level of greed of invisible shareholders. We learn here that the system globally obeys a "zero intelligence". Welcome to the crazy people.

Source: NovaPlanet

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