Dr. Tucker BalchAssociate ProfessorSchool of Interactive Computing

CS 7646: Machine Learning for Trading

Company Value

Find out how modern electronic markets work, why stock prices change in the ways they do, and how computation can help our understanding of them. Learn to build algorithms and visualizations to inform investing practice.

School of Interactive Computing

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Technical AnalysisPrice and volume only

Fundamental AnalysisFinancial statementsP/E ratios, cash on hand, dividends

Two General Approaches to Finding Value

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Weak: Prices reflect all past publicly available information. Prohibits profit from Technical Analysis

Semi-Strong: Weak + prices instantly change to reflect new public information. Prohibits profit from T.A. & Fundamental Analysis

Strong: Semi-Strong + prices instantly reflect even hidden or "insider" information. Prohibits profit from insider information

http://en.wikipedia.org/wiki/Efficient-market_hypothesis

Efficient Markets Hypothesis: 3 Versions

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Shiller, Robert (2005). Irrational Exuberance (2d ed.).

Is the EMH True?

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Cognitive biases such as overconfidence, overreaction, representative bias, information bias.

Behavioral Economics: Argues Against EMH