[HN Gopher] Perplexity AI's new tool for researching the stock m...
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Perplexity AI's new tool for researching the stock market
Author : CrankyBear
Score : 59 points
Date : 2024-10-21 18:30 UTC (4 hours ago)
(HTM) web link (www.zdnet.com)
(TXT) w3m dump (www.zdnet.com)
| airstrike wrote:
| Speaking as a former M&A financial advisor and valuation nerd,
| historical financial data is very close to worthless for any
| valuation work, except perhaps for vaguely connecting the dots to
| your proprietary, _forward looking_ financial model which is
| based on a deep understanding of a particular company and
| industry.
|
| This reads to me like garbage in, garbage out... just like
| 99.9999% of current resources on financial data.
|
| There's definitely an opportunity to disrupt this backwards
| "financial data" industry, but it's not going to be done by
| slapping LLMs and RAGs onto stale data in 10-Qs and 10-Ks.
| serjester wrote:
| I don't touch finance, but I'd be curious to have you elaborate
| on the data sources that a professional does care about.
| infecto wrote:
| They care about anything that helps give insight into the
| future. Its still obtainable data but that is where the edge
| comes from, taking unique data and applying your way of
| thinking (models) to it. This could be anything and
| everything that relates to the company/industry you are
| looking at. You take lots of different bits of information
| and distill it into a model. If you are in the automotive
| space, maybe you care how US policy is looking for China.
|
| To put it differently, historical financials, K/Qs are all
| data points that have been commoditized and you can pull it
| instantly.
| airstrike wrote:
| It depends on whether you're publicly sharing your valuation
| work or confidentially advising a client about valuation.
|
| The former is what equity research analysts do at major
| investment banks (like Morgan Stanley, BAML, JP Morgan, etc.)
| and boutique / middle-market research firms (Stifel, Cantor
| Fitzgerald, Raymond James, Guggenheim, etc.). Google has led
| me to this LinkedIn post with a long list of equity research
| firms which seems accurate and credible after skimming it
| briefly: https://www.linkedin.com/pulse/most-comprehensive-
| list-sell-...
|
| The latter is what I used to do as an M&A advisor. Basically
| the "I want to buy company X, how much should I pay?" or "I
| may be interested in selling / people are reaching out
| expressing interest in my company, how much am I worth?" type
| of scenarios, plus some other more complex but not
| necessarily more fun things like merger of equals and what
| have you. In these situations, the analysis tends to be more
| of a "let's look at it from all angles" which usually gets
| distilled into a one-page summary nicknamed "football field"
| showing ranges of values according to various methodologies.
| Things like DCF, discounted equity value, relative trading
| multiples (also called "comps"), LBO (also called the "floor
| valuation") all get featured and are the standard metrics on
| which an advisor's view is supported.
|
| As an advisor, I never came up with my own projections for
| valuation, because that would open the door for litigation so
| it's just not done. Instead, we point to what "the street" is
| saying, by taking the consensus view (often some filtered
| average/mean of equity research projections usually provided
| by Bloomberg, FactSet or Capital IQ for liability reasons,
| but which may be "handspread" in some situations by actually
| pulling the specific numbers from the latest available
| research reports from several analysts and calculating the
| mean).
|
| I hope that helps answer your question but happy to answer
| any follow-ups too since I'm always glad to share what I know
| about the topic
| infecto wrote:
| I am always surprised companies create these distractions in
| their product. Agree on all your points. Little to no value in
| this tool based on the data they listed. All of these things
| already exist and for anyone doing work of any value, you would
| already have these datasets at your fingertips.
| coffeeandhn wrote:
| Is there a "backwards" financial data service you'd recommend
| instead?
|
| I've been researching a bit and everything I could find was
| basically APIs that charged you by the number of API request
| calls to extract the dataset bit by bit. First the tickers,
| then the aggregates... and so on.
| airstrike wrote:
| - $$$$ Bloomberg
|
| - $$$ FactSet
|
| - $$ Capital IQ
|
| Depends on how much money you have and what your needs are
| but that's basically it
| sirsinsalot wrote:
| That's a lot of "this won't work" without very much "here's
| what does work" leading me to conclude this is bluster and ego.
|
| I always hear these finance people dick waving about how crap
| everyone else's methodologies are without examples of their
| own. This leads me to conclude it's all snake oil anyway.
|
| So I'm asking, speaking as a former M&A financial advisor...
| What _does_ work?
| immibis wrote:
| nothing. There is no way to predict the stock market. Even
| the way you're probably thinking of. Even the ones in the
| replies to this comment. Even the really basic ones and the
| really advanced ones.
| altdataseller wrote:
| This. If something "worked", then nobody would share it, or
| it's so popular that everyone has everyone applied it, and
| it doesn't work anymore.
| jdhwosnhw wrote:
| The existence and success of the Millenium fund is a
| (probabilistic, to be fair) disproof of your assertion.
| FridgeSeal wrote:
| Tbf, I've had friends in finance describe the Millennium
| fund (now Medallion fund I think?) as operating in a
| very, very specific niche of the market. Probably helps
| that it's limited to a very select group. Its
| extraordinary impressive for sure, but I don't think it
| is widely applicable or comparable.
| yifanl wrote:
| What makes you confident a methodology that consistently
| beats the market exists?
| kevin_thibedeau wrote:
| There are a number of wealthy investors who don't tell
| other people about their methodology. They're either very
| lucky, criminals, or have beaten the market.
| yifanl wrote:
| There's wealthy, and there's Wealthy. As the market
| itself tends to trend upwards, you can absolutely ride
| that into wealthy, no crime or extreme luck required.
| dom96 wrote:
| If such methodology doesn't exist then how are quantitative
| trading firms in business?
|
| Genuinely wondering. Is this because they have so much
| money to play with that they can move markets in their
| favour?
| yifanl wrote:
| The one consistent method I know of would be high-
| frequency trading to front-run orders, which involves
| maintaining a moving target of state of the art
| infrastructure (both hardware and software), including a
| relationship at the markets so you can get an ultra high-
| speed connection (I'm certain there are rules with this
| to make it fairer, but I would assume not everyone will
| be provided a connection simply due to physical limits).
|
| But I also assume that's not the type of thing parent
| comment is asking about - Any rational actor with an
| opportunity to do this would already be doing this after
| all.
| airstrike wrote:
| How many quantitative trading firms have gone out of
| business?
| Maxatar wrote:
| As a quant myself, we don't try to predict the market, at
| least not the way that people normally talk about
| predicting, and we certainly don't move the market in our
| favor.
|
| At least what my firm does, is we look at the current
| state of the market at any given time point, and test
| whether the current state of the market satisfies our
| model of an efficient market. If it does, then there's no
| action to take, if it doesn't then we determine what kind
| of violation is present and jump in to close the gap.
|
| So a very trivial example would be to take two ETFs, like
| QQQ and TQQQ. As a simplification a model of an efficient
| market would have at any moment in the day the change in
| price of TQQQ = 3x the change in price of QQQ.
|
| We then observe the actual state of the market and if the
| actual change in price of TQQQ matches our model, then
| there's nothing to do. If it doesn't, then either TQQQ is
| under priced or it's overpriced or QQQ is underpriced or
| it's overpriced (or our model is just wrong or some
| outlier). Depending out what the condition is we buy x
| dollars worth of TQQQ and sell 3x worth of QQQ or do the
| opposite.
|
| There's no real prediction here, we simply have a model
| of what an efficient market looks like, we scan the
| market for violations of that model, and then we perform
| an action to bring the market back to an efficient state.
|
| The model I presented above is incredibly simple and just
| for illustrative purposes, but in a nutshell, that's our
| job. We have literally hundreds of models for an
| efficient market and for every model we have algos that
| test whether the market satisfies our model, and when the
| market deviates from our model the algo produces a signal
| which other algos act.
| plaidfuji wrote:
| So basically, you're seeking super low-risk arbitrage
| opportunities of low-moderate complexity, but like,
| really high throughput and with really low latency
| trading?
| airstrike wrote:
| To be clear, I'm talking about fundamental (relative and
| intrinsic) valuation, not quant trading.
|
| I recently answered a similar question so if you don't mind
| I'll just link you to it:
| https://news.ycombinator.com/item?id=41862295
| FridgeSeal wrote:
| You think the people with the stuff that even "sort of works"
| are likely to be giving up that edge?
| drexlspivey wrote:
| Historical financial data is used for calculating correlations
| between assets, historical volatility, stress testing, VaR etc.
| All very useful if you follow any sort of risk management when
| constructing a portfolio.
| airstrike wrote:
| That's pretty much just stock prices, not 10-Qs and 10-Ks.
| And it's already available elsewhere. For those use cases,
| you need databases and data sources, not LLMs and RAGs.
| eclipsetheworld wrote:
| While I agree with your statement and recognize that, for now,
| Perplexity has only introduced a financial information platform
| comparable to Google Finance or Yahoo Finance, the true value
| of any forward-looking financial model is rooted in the depth
| of the qualitative research supporting it.
|
| Building a useful forward looking financial model mostly
| involves qualitative analysis. This means thoroughly examining
| the company's and competitors' 10-Ks and 10-Qs, digesting
| industry reports, understanding the company's business model,
| breaking down the underlying mechanics of the income statement,
| balance sheet, and cash flow statement, identifying the core
| processes driving value creation, forming solid hypotheses on
| how the business will evolve, etc.
|
| I believe Perplexity, as an advanced answering engine, provides
| a strong foundation for supporting this kind of in-depth
| research and hope to see the platform evolve into this
| direction.
| baxtr wrote:
| Don't expect miracles.
|
| _> At this stage of the game, though, Perplexity Finance needs
| much more refining before I can call it a real competitor to the
| existing stock analysis programs, such as Stock Rover,
| WallStreetZen, and TradingView._
| timhigins wrote:
| This reads like a sponsored/promoted article. Would be nice to
| see a disclosure if it is or they get affiliate link revenue
| fullshark wrote:
| It's probably the traditional way a glowing article gets
| written: a reporter repeats something that a PR rep sent to
| their inbox cause they needed something written to hit a
| deadline.
| kid64 wrote:
| Typical payola rubbish that dominates Ars Technica, Forbes, and
| too many other once-legit publications.
| burkaman wrote:
| Am I missing something, or is this just a normal stock browser
| like Yahoo Finance? I don't see anything remotely new in the
| article or the site (https://www.perplexity.ai/finance/NVDA) and
| it doesn't seem to have anything to do with AI. It's a nice-
| looking feature but I don't think it's newsworthy.
| linsomniac wrote:
| The benefit is that it gives you some suggested topics of
| investigation, including references to where it found that
| information. For example, I looked at one stock I'm interested
| in and it suggested there was a potential short squeeze in the
| making, and the references pointed out that that was 7 months
| ago. So it was summarizing it thinking that was a current
| state. It also suggested summaries about how changes in
| classification of the business might impact the stock price.
|
| I'll probably use this in some of my investigations, but
| definitely need to look at the citations.
| m3kw9 wrote:
| This is the perplexity's take on the roulette historical roll
| display.
| linsomniac wrote:
| Somewhat related: Last night I fed 3 companies proxy statements
| to Notebook LM and had it generate a "podcast" on them. One of
| which was a 100 page document, which I read the bulk of, and the
| podcast was pretty good, though it did misrepresent one 2023
| statement as being a current statement. Definitely a tool I'm
| going to be using more.
| rvz wrote:
| Do not fall for this snake-oil scam garbage from Perplexity. You
| are better off with TradingView.
| whiplash451 wrote:
| If the world needed any evidence that perplexity is desperate,
| this is it.
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