Isn't "finding undervalued companies" fundamentally an infrequent activity
I guess I don't understand why this is necessarily true. ACN supposedly might have traded $.01 on the day of the flash crash (busted). It rallied back after the fact. It was likely undervalued at $.01. If such price behavior were to be an annual, monthly, daily, or hourly occurence, it'd probably still be considered a mispricing of the stock. My position is that "correct" valuation (if such a thing exists) and frequency are entirely independent.
I don't see how it's possible to assess the value of a company relative to market price fast enough to make even 10 trades a day.
i think you're making a comment about the speed at which valuation occurs. without sounding too obvious about the answer, computers are really fast at running numbers (not trying to be rude). there are all sorts of ways of valuing companies, even in the traditional space of "value investing". http://www.fool.com/investing/beginning/how-to-value-stocks-... gives 5 broad methods to start. if there were a method that involved only objective numerical data, then that valuation could occur continuously throughout the day.
I would say High Frequency Trading is, by definition, not about value, but about price only.
I think the 2 are necessarily related. When Value = Market Price, the issue is fairly/correctly priced. When the two diverge, there is an opportunity. High frequency trading is concerned with finding issues that are underpriced with respect to the "true value". So in that sense, I think High Frequency Trading is certainly about price, as is "long term value investing".
[Collecting rebates and high frequency trading don't so much apply to the claim i'm making here]
Comments
Isn't "finding undervalued companies" fundamentally an infrequent activity
I guess I don't understand why this is necessarily true. ACN supposedly might have traded $.01 on the day of the flash crash (busted). It rallied back after the fact. It was likely undervalued at $.01. If such price behavior were to be an annual, monthly, daily, or hourly occurence, it'd probably still be considered a mispricing of the stock. My position is that "correct" valuation (if such a thing exists) and frequency are entirely independent.
I don't see how it's possible to assess the value of a company relative to market price fast enough to make even 10 trades a day.
i think you're making a comment about the speed at which valuation occurs. without sounding too obvious about the answer, computers are really fast at running numbers (not trying to be rude). there are all sorts of ways of valuing companies, even in the traditional space of "value investing". http://www.fool.com/investing/beginning/how-to-value-stocks-... gives 5 broad methods to start. if there were a method that involved only objective numerical data, then that valuation could occur continuously throughout the day.
I would say High Frequency Trading is, by definition, not about value, but about price only.
I think the 2 are necessarily related. When Value = Market Price, the issue is fairly/correctly priced. When the two diverge, there is an opportunity. High frequency trading is concerned with finding issues that are underpriced with respect to the "true value". So in that sense, I think High Frequency Trading is certainly about price, as is "long term value investing".
[Collecting rebates and high frequency trading don't so much apply to the claim i'm making here]