Could MIT Research on Sustainable Trading Advance the End of Poverty?

eToro

It was released this week that MIT is conducting a $1 million test to see if social media can make investors money. These are very exciting times for us at eToro, where we see this great academic research done around social investing.

MIT are researching what they call ‘sustainable trading’. Everyone is talking about sustainable energy, and how it could change the world if anyone came up with an unlimited energy source that can produce energy without any perishable resources. MIT is talking about sustainable trading, and how it could change the world if they come up with a social trading algorithm that can produce positive gains with little risk and none perishable returns.

Anyone who ever dealt with finance or economics, must now be thinking that this is impossible. How can a trading algorithm always be right? If the markets are perfect (which they never are), everyone will start using that algorithm and therefore its returns will perish. MIT researchers, Sandy Pantlant, and Yaniv Altshuler are working on research that shows that social investing is no only more profitable tha manual trading, but that it could become sustainable. How is that possible?

For Quants and Financial Traders

At eToro, all users share all of their data in real time, their actual real trading data, and they can all see, follow and copy from investors across 200 different countries. The MIT algorithm looks at the data, and calculates in real time the social signal of each trade done by each trader. In other words, if eToro shows that “Yoni Assia just bought gold”, MIT checks Yoni Assia’s win ratio in buying gold, who else is buying gold, what are the statistics of everyone who is buying gold now VS the people who are selling gold now, how many people follow the buyers, how many copy the sellers, etc. They can even see if the top gold buyers are talking about what they are doing.

You can think of it as a very sophisticated algorithm. This algorithm has over 50K real people who trade with their real accounts and each of them tries to make a profit. These are skilled and creative people, who try multiple strategies to try and beat the market. Moreover, they have more information than most people since they follow people from around the world and copy them. This is basically a neural network algorithm operated by people, with the simplest and most coherent target – making money, and the algorithm know EVERYTHING about each of them. That’s one powerful algorithm; where else do thousands of people work for an algorithm?

For the Economists

The markets are not perfect, and the most relevant data regarding most assets is eventually in the hand of consumers. People in a specific country will know more about the local banks than the top analysts in another country, and the owners of Apple products and shares will know more about Apple than any analyst. What do consumers know? They know if a company’s products are good or not, and can decide based on that whether they should buy their shares. They can discuss it openly with thousands of other members and they can even actually decide together to sell or buy shares of a specific company. When it’s all public, the rules become different.

How Can This End Poverty in its Ideal State?

Very simple. If there are ways for millions of people to share data and create constant profits for everyone, than there will be no need for loans, people could loan indefinitely and then invest it in sustainable trading, so money will be distributed more equally faster.

About Yoni Assia

Founder and CEO of Etoro.com

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