From: bgoffe@seq.uncwil.edu (Bill Goffe)
Subject: Re: Earn money trading against computer programs
Organization: Univ. of North Carolina @ Wilmington
Date: Sat, 19 Dec 1992 22:55:11 GMT



This is the fifth post in a thread about the Arizona Token Exchange 
(AZTE), a project where real people trade tokens against computer traders
for real money. Basically, Tom Blenko took exception to my orginal post, 
I responded, and Franklin Antonio (did the order of the name get reversed
in the header?) interpreted what he thought Tom was saying while responding 
to my second post.

To make this easier to read, lines from my first post are start with |'s, 
Tom Blenko's response with +'s, my second post (and response to Tom) with
*'s and Franklin Antonio's response to these posts with the traditional >.

I first wrote (in part):
| Earn cash profits by competing against computerized program traders

Tom Blenko responded:
+Aside from being one of the most ignorant propositions
+I've seen in a long time, these guys appear to be talking
+about playing with real money. And if so, it's a scam and a
+fraud. Caveat emptor! 

In part, I responded:
*First off, I'm not sure why this is ignorant.

>I agree with Tom, although I won't use the word ignorant, I believe I 
>understand what he was saying, and after careful evaluation, I agree with
>him completely.  Let me see if I can explain it to you...

I appreciate it. I'll admit that his comments about "a scam and a
fraud" really caught my eye and I was trying hard to address this
point. To me, they are almost the proverbial "fighting words."
Jeez, all I had done was post something about an experiment from
well regarded economists and I saw smoke rising from my screen.

I wrote in my second post:
*There is a lot of
*interest in computer based trading mechanisms. In the popular

>The Arizona Token Exchange is a highly abstract computer game.
>It has almost nothing to do with "trading".  Read the literature
>put out by these folks, and you will see that these academics have
>abstracted the problem to the point where the experiment is meaningless.

I'll admit that I'm not familiar with the details of the game. I'm an
academic economist whose specilities are elsewhere (mostly macro); I 
posted it thinking that some might be interested in it here in misc.invest.
However, let me do my best to answer your point from the perspective of 
an academic economist. After all, we have done some good work that is
used a *lot* by folks in the real world of financial markets (and please,
lets not start a thread on that).

The idea behind the AZTE came from a game using artifical traders organized
by the Santa Fe Institute. Since these "traders" generated a lot of
behavior that is similar to actual markets, it seems reasonable to see
how they would do against "real" traders. I believe that the game is 
restricted to make it easier to understand and analyze the results. In
analyzing real world data, economists often have a hard time testing
hypotheses since different hypotheses may generate the same data. Thus,
in this unusual situation where the economists have some control over
the experiment, an effort was made to make it as simple as possible.
Naturally, there may be debate over whether it was made too simple.

Of course, another possible approach would be to let one of these
artifical traders trade in an actual market. However, to extend the
Santa Fe results, a more straightforward extension would be AZTE.
Further, the point from the previous paragraph may have tipped the 
design toward AZTE.

I wrote in my second post:
*Further, AZTE is similar to the Presidential Stock Market run out
*of the Univ. of Iowa which studied trading (with real money)
*on the outcome of the presidential election. Almost 1,000 took part 

>There is VERY LITTLE similarity.  The Iowa Political Stock Market (IPSM)
>is a very realistic trading environment, where securities based on
>presidential candidates are traded.  

   [material deleted on the details of the 
    ISPM and how poorly the AZTE compares]

My point here was addressing Tom Blenko's claim that it was a fraud
and a scam. AZTE and IPSM are similar in that (i) trading with real
money is used, (ii) the Internet is used, and (iii) it is organized
by academics. I certainly agree that the trading is quite different.

>The NSF has funded AZTE, but I don't think you should use that fact to
>argue that AZTE has value.  

Again, I was addressing his point about a fraud and scam. I don't 
think that NSF funds that sort of thing. I do know that NSF funding 
is hard to get for economists; only about 1/3 of projects are approved.

>Instead, after reading all the literature, you will conclude, as I did, 
>that the NSF wasted your money and my money on a poorly conceptualized 
>academic boondogle.

Maybe. But then again, I come from a different perspective about
economic research (which of course may have flaws). I hope that 
someday there is a AZTE II that would address your concerns and
provide a lot of intersting data and provide insight on how actual
markets work.

I'd love to read more about it, but unfortunately I'm in the middle
of a job search and am quite pressed for time. Sometimes it just
doesn't pay to read about interesting stuff that won't get you
publications as quickly as the stuff you're working on.

Bill Goffe
Dept. of Economics & Finance
Univ. of North Carolina @ Wilmington
Wilmington, NC  29403
(919) 395-3637
bgoffe@seq.uncwil.edu

Newsgroups: misc.invest