Hacker News Reader

I'm very far from the finance world so please correct me if I'm saying something stupid.

But how does eg an algorithm that sells stock when the newspaper headlines have a "negative sentiment" help ensure that "market prices are honest and fair"? What's "honest and fair" about stocks across the board dropping because of bushfires or a virus outbreak, only to rise back to pre-headline levels half a day later?

View on HN

The best way to make a correct prediction is to continually update your estimate as new information comes in. As it comes in. That’s all the markets are doing.

When the virus starts, the markets adjust downwards because there is a chance that virus kills tens of millions, which would have severe economic impact.

As the world public health starts to reduce the error bars or bad outcome likelihood, the market adjusts.

The problem is that you’re thinking of something as having a concrete value. Instead, think like Tetlock teaches in superforecasters. Then you will have a better model of what’s going on.

Reply on news.ycombinator.com