This is an automated archive made by the Lemmit Bot.

The original was posted on /r/Superstonk by /u/Noderpsy on 2024-09-16 15:45:42+00:00.

From this article:

The most obvious risk from AI in financial markets is that AI-powered “black box” trading algorithms run amok, and all end up selling the same thing at the same time, causing a market crash.

Would be a shame if said algos all BOUGHT at the same time…

Go ahead, read the article, i’ll wait.

I sense a wrinkle forming.

Who could have seen this coming though?

Oh wait…

"Researchers developed a model of stock market behaviour that consists of just two terms: a correlation coefficient that represents the individual tendency to follow the group (herding), and a random term that represents the individual’s unpredictable reaction to new external information.

The researchers found that this simple model could capture several features of the market, including short-term price fluctuations, as well as partial long-term correlations of stocks with respect to other stocks and the index. Other known features of real markets that emerged in this model were the Epps effect (the phenomenon that correlations decrease as sampling frequency increases), short-term lagged autocorrelation (the correlation of a stock with itself), and synchronized “bursts” between stocks.

Is somebody now feeding their own algorithms via manufactured social media sentiment, and then betting on the outcomes, knowing how the systems will react?

If you ask me, this all feels like it’s a single mayo covered pubic hair away from disaster.