From: antonio@qualcom.qualcomm.com (Franklin Antonio)
Subject: Re: Earn money trading against computer programs
Organization: Qualcomm, Inc., San Diego, CA
Date: Fri, 18 Dec 1992 08:47:59 GMT

In article <1992Dec17.184208.29346@seq.uncwil.edu> bgoffe@seq.uncwil.edu (Bill Goffe) writes:
>Tom Blenko writes (in response to my earlier post which he marks with |'s):
>>| 
>>|                             ANNOUNCING THE OPENING OF THE
>>|                             ARIZONA TOKEN EXCHANGE (AZTE)
>>|                                   January 1, 1993
>>| Earn cash profits by competing against computerized program traders
>
>>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! 
>
>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...

>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.


>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.  Your opponents are other humans.
Your information, knowledge, and beliefs about the future of political
candidates change with time, disclosure of news, etc in a fashion similar
to real stocks and real companies.  The IPSM runs over a period of time
long enough so that trends in euphoria and gloom have time to develop
in the polls, and capture our attention, and allow us to overreact, just
as we overreact to trends in the stock market.  The IPSM also contains
multiple related securities, trading simultaneously.  Therefore, there is
the opportunity for arbitrage, and market-making.  The IPSM, therefore, is
very realistic, and I feel that I learned a lot by participating in it.

The AZTE, on the other hand, is a set of hour-long experiments where you
are assigned randomly valued "tokens", which have no meaning, and whose
value does not change.  These tokens have no character or meaning at all.
You trade them by typing in numbers that are either accepted or not.
You "trade" against computers, not against humans.  The winner is not the
one who ends up with the most money, (amazing) but is instead the person
who maximizes a theoretical trading efficiency function, which has no
relationship to anything useful.  I don't think this sterile game has
any relationship to any real useful situation.

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

----
These opinions are mine, and do not represent my employer.

Newsgroups: misc.invest,misc.taxes