> The main reason why competitive market price movements tend to be stochastic and I(1), and tend to exhibit little highly profitable predictable seasonality, is because if that wasn’t true, then people would be able to make free money and markets would no longer be weak-form efficient.
Oh no! Someone invoked weak-form efficiency! I guess every market maker should shut down now?
OP is trying to criticize the hypothetical Prophet-trader because Prophet seems to rely on trivial seasonalities for forecasting. But he is ignoring that the bare minimum configuration for Prophet requires several injections of domain expertise (or at least bias):
- Prophet predicts event frequencies, not prices/events. So presumably it must be used in conjunction with another price model.
- The Prophet user must acquire and group data for their forecast -- which is itself a form of locale-sensitive regularization, and is often >50% of the challenge of calibrating a predictive model.
- Prophet users configure market sizes, change points and event streams ("holidays" are a special case, not the only example) based on external data.
Obviously none of these things saved Zillow, but they are all outside the conditions supported by weak-form efficiency, which gives you a good idea of how useless that concept is in practical trading.
I have zero investment in Prophet and wouldn't use it for a trading model, but it's annoying to see Data Twitter's culture of assuming others are dumb in order to quote grad school stats classes getting rebroadcast elsewhere.
Oh no! Someone invoked weak-form efficiency! I guess every market maker should shut down now?
OP is trying to criticize the hypothetical Prophet-trader because Prophet seems to rely on trivial seasonalities for forecasting. But he is ignoring that the bare minimum configuration for Prophet requires several injections of domain expertise (or at least bias):
- Prophet predicts event frequencies, not prices/events. So presumably it must be used in conjunction with another price model.
- The Prophet user must acquire and group data for their forecast -- which is itself a form of locale-sensitive regularization, and is often >50% of the challenge of calibrating a predictive model.
- Prophet users configure market sizes, change points and event streams ("holidays" are a special case, not the only example) based on external data.
Obviously none of these things saved Zillow, but they are all outside the conditions supported by weak-form efficiency, which gives you a good idea of how useless that concept is in practical trading.
I have zero investment in Prophet and wouldn't use it for a trading model, but it's annoying to see Data Twitter's culture of assuming others are dumb in order to quote grad school stats classes getting rebroadcast elsewhere.