Author Topic: The efficient market hypothesis vs. Reddit  (Read 1568 times)

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Offline Ben_Jamin

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Re: The efficient market hypothesis vs. Reddit
« Reply #35 on: January 30, 2021, 08:36:23 PM »
Great Post Ludiwg. Thanks for that info.
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Online Stadler

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Re: The efficient market hypothesis vs. Reddit
« Reply #36 on: January 31, 2021, 08:58:52 AM »
There's another argument, though, that this is the system working.  This is just as likely a case of something that happens fairly frequently (safeguards and controls in the system) having a light shown on them and people - not saying you or anyone here - not understanding how the system works and opting immediately for "Scam!" as an explanation.   The market puts brakes on trades all the time.   There's nothing new about that. 

Does Robinhood, though?

Again, I'm genuinely asking, because I'm not well versed on this stuff.  But I've been dabbling on Robinhood myself for about a year now, and I've never received emails from them about volatility of individual stocks.  I've received three such emails about GameStop.  One of which opened with the phrase "It's been a tough day."

I get the sense that Robinhood's reaction in particular is part of what is making people think the system is being rigged (not by Reddit, but by Robinhood, Citadel, and/or Melvin).  But I'll reiterate that most of this is way over my head, and I'm mostly just trying to follow along.

Robinhood can stop a trade at any time for any reason.  They stop individual people from trading all the time.   The idea that Robinhood stopped trading because some billionaires told them to is bordering on "there are 50,000 votes for Trump sitting in a filing cabinet in Georgia" territory. It's not THAT complicated - though I can't say I can explain every step - but essentially there is a clearing house that makes sure all trades happen at the prescribed time (and there are BILLIONS of trades done each day).  You or I can't access that clearing house, but the brokers can.  And there are requirements that the brokers have to meet to do business with the clearing house, including collateral issues, just like you and I have to meet with the brokers.  If my balance drops low, or I don't have enough to cover a particular position, the broker need not take my trade.   Same with the brokers; if they can't cover or make the trades they take, they will not be able to do that; there are probably legal issues with knowingly taking a trade from a customer if they KNOW they can't complete it, so they stop trades.

EDIT:  Ludwig beat me to the punch and with a lot more details.   Sorry for the repeat.
« Last Edit: January 31, 2021, 10:03:39 AM by Stadler »

Offline lonestar

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Re: The efficient market hypothesis vs. Reddit
« Reply #37 on: January 31, 2021, 09:54:46 AM »
Thanks for the post Ludwig, I fucking love smart people who articulate the point smoothly.

Online Stadler

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Re: The efficient market hypothesis vs. Reddit
« Reply #38 on: February 17, 2021, 05:45:47 AM »
New data is starting to show the "independent Reddit investor driving the entire stock market" is a bit of an overstatement.   SOME hedge funds took a hit, but many more actually hopped on the bandwagon and were integral in driving the increase in Gamestop stock.   We all love a "David and Goliath" story, but that's not what this is looking like anymore.

There are other articles in Forbes and The Wall Street Journal that support that conclusion.


Online hefdaddy42

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Re: The efficient market hypothesis vs. Reddit
« Reply #39 on: February 17, 2021, 06:47:03 AM »
Please stop ruining our feel-good story with your factual information.

 :tup
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Offline Dublagent66

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Re: The efficient market hypothesis vs. Reddit
« Reply #40 on: February 17, 2021, 07:45:58 AM »
That's exactly what I thought.

Offline LudwigVan

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Re: The efficient market hypothesis vs. Reddit
« Reply #41 on: February 17, 2021, 02:34:43 PM »
Absolutely. It would be naive to think that hedge funds, which come in all shapes and sizes, wouldn't have smelled blood and acted the bloodhound by jumping into the feeding frenzy that was the GME short squeeze.  After all, that's their job. 

And before Reddit even existed and your general public even knew what a short sale was, let alone a short squeeze, traditional hedge funds made it a practice to squeeze positions that they knew other hedge funds held. The difference was that it was all done on the QT, without the mega-hype of social media, which fueled the frenzy to ever greater proportions.

One has to wonder if any of the hedge funds that participated in the squeeze surreptitiously joined in on WSB Reddit chat conversations with the intent of driving up the stock price for their own benefit.

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Offline ReaperKK

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Re: The efficient market hypothesis vs. Reddit
« Reply #42 on: February 17, 2021, 02:44:14 PM »
One has to wonder if any of the hedge funds that participated in the squeeze surreptitiously joined in on WSB Reddit chat conversations with the intent of driving up the stock price for their own benefit.

I believe this 100%, I've been a member of WSB for a little while now and it wasn't recognizable during the GME pump. It's still not really the same IMO, I think SSB is a lot better now with WSB still being good for memes.


Offline LudwigVan

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Re: The efficient market hypothesis vs. Reddit
« Reply #43 on: February 17, 2021, 05:17:42 PM »
I canít really stomach WSB anymore. I had joined up when there were only around 2mm members. Thanks to recent events, itís now ballooned up to over 9mm joiners.

In any case, I pity the poor SEC investigator who has to weed through thousands upon thousands of inane chatroom posts, memes and rocketship emojis to try to find any evidence of wrongdoing by WSB reddit members. 
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Offline XJDenton

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Re: The efficient market hypothesis vs. Reddit
« Reply #44 on: February 18, 2021, 04:24:30 AM »
I had joined up when there were only around 2mm members.

I heard they liked shorts, but this seems excessive.
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Online Chino

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Re: The efficient market hypothesis vs. Reddit
« Reply #45 on: February 18, 2021, 05:35:06 AM »
I canít really stomach WSB anymore. I had joined up when there were only around 2mm members. Thanks to recent events, itís now ballooned up to over 9mm joiners.

In any case, I pity the poor SEC investigator who has to weed through thousands upon thousands of inane chatroom posts, memes and rocketship emojis to try to find any evidence of wrongdoing by WSB reddit members.

Yeah. That sub has gone to complete shit. I was in there pre-2M members as well. It's a completely different planet now. It's pretty nauseating.

Offline ReaperKK

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Re: The efficient market hypothesis vs. Reddit
« Reply #46 on: February 18, 2021, 06:04:56 AM »
Check out smallstreetbets it's pretty decent and reminds me of old wsb

In any case, I pity the poor SEC investigator who has to weed through thousands upon thousands of inane chatroom posts, memes and rocketship emojis to try to find any evidence of wrongdoing by WSB reddit members. 

I'm sure they'll get a laugh here and there

Online hefdaddy42

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Re: The efficient market hypothesis vs. Reddit
« Reply #47 on: February 18, 2021, 07:23:02 AM »
I had joined up when there were only around 2mm members.

I heard they liked shorts, but this seems excessive.
lol
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Online Stadler

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Re: The efficient market hypothesis vs. Reddit
« Reply #48 on: February 18, 2021, 09:21:38 AM »
I had joined up when there were only around 2mm members.

I heard they liked shorts, but this seems excessive.
lol

 :tup

Online Stadler

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Re: The efficient market hypothesis vs. Reddit
« Reply #49 on: February 18, 2021, 09:28:56 AM »
The lesson from all of this is really that this stuff isn't as simple and linear as the discussions seem to indicate and as some of the observers want.  It's just not reality.   There's one example where it LOOKS LIKE there's direct cause and effect, but to accept that is to ignore the 100's if not 1,000's of other cases that don't fit the model.   Jeff Immelt lost a $100M/year (plus or minus, depending on the year) job because in no small part the GE stock wasn't responding the way it should.    If it was only as easy as seeding a Reddit forum group...

I'm sorry if I'm bursting balloons; I don't mean to, but we need to see the world the way it is, not the way we want it to be.

Offline LudwigVan

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Re: The efficient market hypothesis vs. Reddit
« Reply #50 on: February 18, 2021, 02:57:56 PM »
Whatís just as fascinating to me is the $900,000,000 that Citigroup erroneously wired out, for which they sued to recover from those hedge funds that refused to pay it back. Citing some obscure legal precedent, the judge in this case has determined that those hedge funds can keep the money. Needless to say, Citigroup is appealing the case.

At first glance, one wouldíve thought that money sent by a bank in error should rightfully be returned, but not so in this case. Reading through the evidence reported in court reveals that the circumstances were much more complicated than someone simply ďfat-fingeringĒ a wire payment.

« Last Edit: February 18, 2021, 03:22:40 PM by LudwigVan »
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