Japanese Robot Calls the Market Better Than a Human
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On the 10th day of every month, Junsuke Senoguchi has just one thing on his mind — the closing level of the Nikkei 225 Stock Average.
That’s because Senoguchi, an unassuming man in his late 40s, has built a machine that’s been predicting the direction of Japanese shares, and once a month he gets a progress report on its success. The model makes a simple call — whether the equity index will be higher or lower after 30 days — and over almost four years it’s been right 68 percent of the time.
“I’m so happy” when it works, said Senoguchi, a senior equity strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “It’s because I feel I can predict the future.”
Algorithms have invaded global share markets, used by everyone from high-frequency traders closing bets in fractions of a second, to specialist asset managers whose strategies are determined by complex quantitative analysis. Medallion, the fund created by James Simons at quant-trading pioneer Renaissance Technologies, averaged a 71.8 percent annual return, before fees, from 1994 through mid-2014. There’s also the growing field known as robo-advice, which uses algorithms to suggest investments based on clients’ goals and risk tolerances.
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