Can Rats Predict Foreign Exchange Markets?

November 12, 2014 in Daily Bulletin

Joe Pinsker wrote about a piece of financial art:

  • An artist started a project where he trained rats to make predictions about the foreign exchange markets.
  • Movements in the value of foreign currencies were translated into musical notes. Rats were then trained to predict the next musical note. If they got it correct they got a treat, if they got it wrong they got a minor shock.
  • After a few months rats with low rates of accuracy were removed. The good predictors were then cross-bred to create offspring that turned out to be even better at making predictions.
  • One second generation rodent trader had an accuracy rate of 57% – better than many of the world’s leading fund managers.
  • The rats have their own (mock) corporate website and claim to be headquartered in the Cayman Islands.
  • Those looking to find the nearest rat for instant riches should note that the rodents get tired after about 20 trades, severely limiting their use.
  • Moreover this was an art, not a science project. It did not go through tests for statistical significance, or have its method scrutinized. The correlation is likely a coincidence.

Read more about why the rats may outperform humans, why this should be treated as satire, and what the artist thinks about it all over here.

Source: The Atlantic