[In-Depth Look] The Struggles of Ant Investors

Kim Dong-chul, Ph.D. in Engineering · Advisor at Bespin Global

Through the experiences of Seohak Ants and Donghak Ants, a nationwide investment craze has intensified. Samsung Electronics and Kakao stocks are even called national stocks. Everyone easily opens accounts and trades stocks using their smartphones. Watching the real-time price boards fluctuate is highly addictive, much like children engrossed in games. However, ants are just ants; from the perspective of overseas investment experts, Korea’s market is small and investors are still inexperienced. No matter how much ants resist against groups with solid theories and enormous capital, they remain ants. While the U.S. stock market operates overnight during Korea’s night, it influences the Korean stock market the next day. It is difficult for Korea’s stock market to affect the U.S. economy, likely due to its smaller scale.

A major economic issue blowing from the U.S. is the post-COVID-19 economic revitalization and the need to preemptively curb inflation by withdrawing the money that has been pumped into the economy. As a result, it is only a matter of time before our stock market takes a hit; this is an inevitable and predictable issue. When foreign capital exits the stock market, ants fill the gap. Is the timing delayed due to late information? Or is it done deliberately in reverse?

In September 2019, a terrorist attack occurred on drilling-related facilities in Saudi Arabia. Such an event can cause crude oil prices to surge and the economy to shake. However, a company called ‘Orbital Insight,’ which monitors global oil tanks and uses artificial intelligence to measure crude oil storage levels, immediately provided paid information that global crude oil storage had not decreased. Investors with fast information were able to ignore the temporary crude oil price surge caused by the news. Perhaps Korean ants have painful memories of selling oil-related stocks at a loss following the news. Predicting terrorism is difficult, but it is possible to predict how the economy will react afterward.

The book “The Man Who Solved the Market (2021, Gregory Zuckerman),” which covers the life of Jim Simons, a mathematician famous as an investor, details how Simons achieved enormous wealth using advanced mathematical models. He founded Renaissance Technologies and operated the Medallion fund from 1988 to 2018, achieving an average annual net profit of 60%. This far exceeded the returns of well-known investors like George Soros (32%) and Warren Buffett (20.5%) during the same period. It was the result of modeling that analyzed all possible data using the highest-spec computers of the time.

Renaissance Technologies employs over 60 Ph.D.s in mathematics, economics, and psychology, developing models related to behavioral economics theory, confirmation bias, statistical inference, and various anomalies in the stock market, which they use for prediction. They identify unusual patterns in past price data and verify whether the anomalies are statistically significant and consistently occurring. They also strive to determine whether the discovered information can be reasonably explained. Fortunately, recent stock market trading systems can now closely follow similar models without time lag with the U.S. The way to become a wise ant without falling victim to foreign professional systems is to receive guidance from similar artificial intelligence and exclude personal opinions to minimize risk as much as possible.

This content was produced with the assistance of AI translation services.