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The New Investor

The New Investor

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Published by Joshua Maher
In depth review of automated trading and high frequency trading
In depth review of automated trading and high frequency trading

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Categories:Business/Law
Published by: Joshua Maher on Sep 25, 2013
Copyright:Attribution Non-commercial

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09/25/2013

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Electronic copy available at: http://ssrn.com/abstract=2227498
Te New Invet
Tom C.W. Lin
AbsTrAcT
 A      . M   b       . H   b  . H   b  b  by z y   .      , ,  b,  ,  . M   b  y  w   y   y . I,  ky y  w yb:  , . M     w  A  yb . T A      b, ,   x      w-   w, y,  . T A bby        z   w   x. Nx,  x    b   w    w  by  . T A     y ,,           . Sy,  w      yb, xw y k k    y,  w’ y     ,  x  w  y  .Fy, w       b   bw  ,  A  w         w  w    ,       wk w    ky  b   b .
AuThor
  C.W. L  A P  Lw   Uy  F L C Lw.F    x, I    P A, SBb, S C, J I, O K, D L, Ly Lky,Gy MC, W P, A P, M S, D Sk, C W,   wk   A Uy WC  Lw,  Uy By S  Lw,  Uy  FL C  Lw,   Uy  G S  Lw. Ay, I   A Bk, G Gz, A H, S H, 
UCLA Law Review
  xy    ,   Uy  F L C  Lw    . My    b B G’  bk,
Te Intelligent Investor 
.
See 
Benjamin Graham, heIntelligent Investor (4 . 1973).
   u   c   L   A   L   A   W    r   E   V   I   E   W
60 UCLA L. R
ev
. 678 (2013)
 
Electronic copy available at: http://ssrn.com/abstract=2227498
TAbLE of coNTENTs
Introduction.............................................................................................................680I. he Rise of Machines .....................................................................................683 A. I Sy ...................................................................................................684B. I F ..................................................................................................687II. he Evolution of the Investor ....................................................................693 A. T Rb I............................................................................694B. T I I ...............................................................................696C. T Nw I ......................................................................................699III. Clear, Present, and Future Dangers ..........................................................703 A. T F C  F C ........................................................703B. Cyb  Cyb ..................................................................706IV. Emerging Implications and Consequences ................................................710 A. O S  Lk...................................................................................7111.  F  S ...............................................................................7112.  Lk  F ............................................................................714B. O Lw  R ....................................................................................717C. O R  Ay ................................................................7221. Bw R   Iy ..............................................7222. W  Iy .........................................................................725V. A Defense of Our Future .............................................................................727 A. O Cy  R .................................................................727B. O M  H .......................................................................730Conclusion ................................................................................................................734
679
 
Electronic copy available at: http://ssrn.com/abstract=2227498
680
 
60
 
UCLA
 
L.
 
R
EV
.
 
678
 
(2013)
I
NTRODUCTION
 
 The
 
end
 
is
 
near
 
for
 
the
 
human
 
investor.
1
 
Computers
 
have
 
changed
 
ev-erything.In
 
May 
 
2010,
 
the
 
Dow 
 
 Jones
 
Industrial
 
 Average
 
lost
 
one
 
thousand
 
points
 
in
 
a
 
matter
 
of 
 
minutes,
 
destroying
 
nearly 
 
$1
 
trillion
 
in
 
market
 
 value
 
for
 
no
 
apparent
 
reason.
2
 
 After
 
months
 
of 
 
investigation,
 
the
 
culprit
 
turned
 
out
 
to
 
be
 
automated
 
computer
 
programs.
3
 One
 
of 
 
the
 
most
 
important
 
developments
 
of 
 
the
 
past
 
century 
 
is
 
the
 
growing
 
and
 
pervasive
 
presence
 
of 
 
computers
 
in
 
modern
 
life.
 
 The
 
first
 
computer
 
 was
 
in- vented
 
in
 
1941.
4
 
In
 
1946,
 
it
 
acquired
 
electronic
 
memory 
 
and
 
software.
5
 
In
 
1950,
 
the
 
first
 
commercially 
 
produced
 
computer
 
 was
 
built.
6
 
In
 
1952,
 
computers
 
predict-ed
 
the
 
presidential
 
election.
7
 
By 
 
1969,
 
they 
 
 were
 
common
 
in
 
corporate
 
 America.
8
 
In
 
1983,
 
the
 
computer
 
 was
 
named
 
Time 
 
magazine’s
 
“Machine
 
of 
 
the
 
 Year
 
in
 
lieu
 
of 
 
a
 
“Person
 
of 
 
the
 
 Year.”
9
 
By 
 
1991,
 
it
 
connected
 
the
 
 world
 
through
 
the
 
inter-net.
10
 
In
 
1997,
 
the
 
computer
 
became
 
 world
 
chess
 
champion.
11
 
By 
 
2003,
 
the
 
com-puter
 
became
 
a
 
part
 
of 
 
a
 
majority 
 
of 
 
 American
 
homes.
12
 
 And
 
in
 
2011,
 
it
 
became
 
1
. The
 
human
 
investor
 
has
 
long
 
been
 
the
 
main
 
character
 
of 
 
modern
 
financial
 
regulation.
 
See,
 
e.g.
,
 
H.R.
 
EP
.
 
N
O
.
 
73-1383,
 
pt.
 
2,
 
at
 
5
 
(1934)
 
(focusing
 
on
 
investor
 
protection
 
during
 
the
 
enactment
 
of 
 
the
 
Securities
 
Exchange
 
 Act
 
of 
 
1934);
 
H.R.
 
EP
.
 
N
O
.
 
73-85,
 
pt.
 
1,
 
at
 
2
 
(1933)
 
(emphasizing
 
the
 
pro-tection
 
of 
 
investors
 
as
 
the
 
purpose
 
of 
 
the
 
Securities
 
 Act
 
of 
 
1933);
 
Ralph
 
K.
 
 Winter,
 
On
 
“Protecting 
 
the 
 
Ordinary 
 
 Investo
,
” 
 
63
 
 W 
 ASH
.
 
L.
 
EV 
.
 
881,
 
882–83
 
(1988)
 
(noting
 
that
 
safeguarding
 
investors
 
is
 
a
 
primary 
 
goal
 
of 
 
securities
 
regulation).
2
. Graham
 
Bowley,
 
Dow
 
Falls 
 
1,000,
 
Then
 
Rebounds,
 
Shaking 
 
 Market 
,
 
N.Y.
 
 T
IMES
,
 
Ma
 
7,
 
2010,
 
at
 
 A1.
3
. Graham
 
Bowley,
 
Lone 
 
Sale 
 
of  
 
$4.1
 
Billion
 
in
 
Contracts 
 
Led 
 
to
 
‘Flash
 
Crash’ 
 
in
 
 May 
,
 
N.Y.
 
 T
IMES
,
 
Oct.
 
2,
 
2010,
 
at
 
B1.
4
.
See 
 
D
IANA
 
H.
 
H
OOK 
 
 
 J
EREMY 
 
M.
 
N
ORMAN
,
 
O
RIGINS
 
OF 
 
C
 YBERSPACE
:
 
 A
 
L
IBRARY 
 
ON
 
 THE
 
H
ISTORY 
 
OF 
 
C
OMPUTING
,
 
N
ETWORKING
,
 
 AND
 
 T
ELECOMMUNICATIONS
 
78
 
(2002).
5
.
See 
 
id.
 
at
 
85–86.
6
. Norman
 
E.
 
Fry,
 
Univac 
,
 
in
 
H
ISTORICAL
 
D
ICTIONARY 
 
OF 
 
 THE
 
1940
S
,
 
at
 
390
 
(James
 
G.
 
Ryan
 
 
Leonard
 
Schlup
 
eds.,
 
2006).
7
. C
 ARL
 
EYNOLDS
 
 
P
 AUL
 
 T
 YMANN
,
 
S
CHAUM
S
 
O
UTLINE
 
OF 
 
P
RINCIPLES
 
OF 
 
C
OMPUTER 
 
S
CIENCE
 
11
 
(2008).
8
. P
 AUL
 
E.
 
C
ERUZZI
,
 
 A
 
H
ISTORY 
 
OF 
 
M
ODERN
 
C
OMPUTING
 
110
 
(2d
 
ed.
 
2003).
9
.
Time 
 
typically 
 
chooses
 
a
 
“Person
 
of 
 
the
 
 Year,”
 
but
 
in
 
1983
 
the
 
distinction
 
 was
 
granted
 
to
 
a
 
machine
 
for
 
the
 
first
 
time.
 
See 
 
Otto
 
Friedrich,
 
The 
 
Computer 
 
 Move
 
 In
,
 
 T
IME
,
 
 Jan.
 
3,
 
1983,
 
at
 
14.
10
. The
 
 World
 
 Wide
 
 Web
 
debuted
 
on
 
December
 
25,
 
1990.
 
See 
 
S
 TEPHANIE
 
S
 AMMARTINO
 
M
C
P
HERSON
,
 
USA
 
 T
ODAY 
,
 
 T
IM
 
B
ERNERS
-L
EE
:
 
I
NVENTOR 
 
OF 
 
 THE
 
 W 
ORLD
 
 W 
IDE
 
 W 
EB
 
5
 
(2010).
11
.
ENG
-
HSIUNG
 
H
SU
,
 
B
EHIND
 
D
EEP
 
B
LUE
:
 
B
UILDING
 
 THE
 
C
OMPUTER 
 
 T
HAT
 
D
EFEATED
 
 THE
 
 W 
ORLD
 
C
HESS
 
C
HAMPION
,
 
at
 
ix
 
(2002).
12
.
See 
 
S.
 
C
RAIG
 
 W 
 ATKINS
,
 
 T
HE
 
 Y 
OUNG
 
 AND
 
 THE
 
D
IGITAL
:
 
 W 
HAT
 
 THE
 
M
IGRATION
 
 TO
 
S
OCIAL
-N
ETWORK 
 
S
ITES
,
 
G
 AMES
,
 
 AND
 
 A
NYTIME
,
 
 A
NYWHERE
 
M
EDIA
 
M
EANS
 
FOR 
 
O
UR 
 
UTURE
 
3
 
(2009).

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