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Computer Models Won't Beat the Stock Market Any Time Soon
Article

Computer Models Won't Beat the Stock Market Any Time Soon

Richard Dewey
Bloomberg Businessweek , 2019
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8

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Recommendation

Many companies sift through masses of data to present highly targeted recommendations to their customers. But except for a few hedge funds, financial firms haven’t found a way to use computer models to identify worthwhile investments. In this informative analysis, portfolio manager Richard Dewey explains why it’s easier for your smartphone to recognize your face in a crowd than it is for a powerful computer to discover undervalued stocks. Financial professionals, investors and anyone interested in the potential of revolutionary technologies will appreciate this fascinating overview.

Summary

Despite advances in computing power, most smart machines aren’t smart enough to outperform an index fund.

Developing computer algorithms that provide an edge in investment decisions is not impossible. A few hedge funds have made big investments in technology that have yielded massive returns, but these remain largely unavailable to all but the most well-heeled clients.

The maxim that “most investors can’t beat the market” remains true, and the success of any market strategy tends to be short-lived.

Investing presents unique challenges for technology developers because the stock market is complex and unpredictable...

About the Author

Richard Dewey is a portfolio manager at the Royal Bridge Capital hedge fund.

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