28 June 2012

Look to Shannon thou sluggard; consider his definitions and be wise.

The Economist: Graphic Detail | KNC | Tracking social media: The mood of the market

Markets, the classical economists instructed, rely on information. But what if there is too much of it, not too little?
Information is data which reduces entropy, or equivalently, helps you to make more accurate predictions. If you have "too much information," it's not really information.

(Yes, yes. I know there are many definitions of "information" and for many of them you can indeed have "too much." But I think using the sense of information I use above makes the whole situation KNC describes (the introduction of sentiment analysis data in quantitative finance) easier to understand. MarketPsych is not selling people information. It is selling them data. How much information is contained in that data is TBD.)

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