That in the "black box"?

thor: god of thunder
With remarkable regularity in the press there are reports of new revolutionary methods to successfully play in the financial markets, not spending with intellectual effort. Most often, these methods are documented in the form of programs and offers a welcome for a small fee. The fact that behind such proposals, said in the article.


Method <black box> we call a set of methods covered by common methodological approach. Most often they are used as tools of statistical packages or neural networks, although we know of cases when used in less traditional tools.

These methods have in common is this: <currently impossible to give a complete description of the mechanisms of the financial market, such, for example, Newton's laws which provide for the mechanical systems. Therefore, we assume that we know nothing about these mechanisms. But we have a series of data describing the operation of the market in the past. It is important that these data were <representative, homogeneous and stable> and what they stand for, we do not care. These data, combined with our wonderful tool to manage a portfolio is much better than any other method, but still nothing to think>. Thus, the financial market is seen as a <black box>. It has inputs that can try on, and have outputs that are also measurable. What is arranged inside the box, we do not know, and most importantly - do not want to know. How fruitful this approach? As the cornerstone laid rows of data will start with them.

First, the data must be comprehensive enough. To explain this thesis, we consider a physical example. Suppose a charged particle moves in the electric and magnetic field. If the electric and magnetic fields can be measured, there is a relationship between these fields and particle motion. What if we can only try on the electric field and the magnetic measurements can not be changed and is difficult? Most likely, we conclude that the relationship between the electric field and the motion of the particles is absent. Example from physics is chosen deliberately. The fact that there is a well studied physical essence of the phenomenon, and therefore we can say with certainty what factors influence the motion of the particle.

In economics, everything is more complicated. Say what factors may have an impact on this segment of the market, based on general considerations, it is impossible. Therefore, it takes a meaningful economic analysis of the problem, that is, the study of what is in the <a black box>. At the moment, there are no grounds to believe that all the available information provides a complete description of a particular sector of the financial market. But even suppose that God, or the news agencies made sure that the information was sufficient. Does this mean that you can not think about nothing? Apparently not. For example, the stock market is described by various media outlets by using indexes. These indexes have been well over a dozen. Which one to choose? Without economic analysis on this issue is unlikely to be answered. Use all of them - not the best way out.