Rat Traders

"Ms. Kleinworth is about to press the button to go short in the Treasury Bond market."

The following text and pictures illustrate an experiment I carried out that involved training laboratory standard rats in trading in the Foreign Exchange and Commodity Futures markets, with the result that I managed to outperform some of the world's leading Human Fund managers. [...]

Each time after listening to a sound, the rat had to choose between pressing either a green or a red button, green for "long" (if the prices were expected to move up), red for "short" (if they predicted a decline in prices). When they were right they received a small amount of food (the good rats became fat very fast); when they took the wrong button, they received a minor electric shock. Very soon it showed that some rats were doing outstandingly well: they developed a good ability to remember the patterns they were listening to; we needed them to react to real time data though. [...]

After extensive training, we wanted to find out if the talent in trading might be rooted genetically and crossed the top traders with each other. After only 20 days, we had 28 new rats (15 males and 13 females), and we soon started to train again (even reducing the training time). The results were astounding: the second generation of top traders had a much better performance than their parents.

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7 Responses:

  1. Leonardo Herrera says:

    I can't tell if they are joking or not. I mean, it is an "artsy" thing - but with some real data (*) to show. It's funny, but appealing :-)

    (*): Unless that's part of the joke, like the kitten-in-a-jar ecommerce site of yore.

  2. JC says:

    Douglas Adams knew it all along, we're only the third most intelligent species on earth.

  3. Foot says:

    I want this to be real so badly. Would invest in that hedge fund too, just for kicks.

    • Tom Lord says:

      I want this to be real so badly.

      Somewhere in Manhattan, in the windowless office of a consulting firm that serves only Goldman Sachs, a mesomorphic physics-major-cum-Haskell-programmer on his lunch break, noodles hanging out of his mouth, stares bug-eyed at your comment as his face flushes with rage and the tensed muscles in neck push out through his pale, stubly skin. His breathing quick now. His voice cracking, little bits of half-chewed food flying onto his screen, he shouts "DON'T YOU THINK WE ALREADY TRIED THAT!"

  4. Line Noise says:

    All the rats scored around 50% so I'm not sure if they would be any more effective than simply flipping a coin. So what I take from this is that flipping a coin will outperform professional traders.

  5. James says:

    What's really fun is when you see them write a derivative based on tax repatriation.

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