March 24, 2013

Aleksandar Zvorinji ’13 Attempts to Beat the Stock Market Through ‘Collective Intelligence’

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Using the idea of collective intelligence — which compiles many people’s guesses to create a more accurate aggregate prediction about something — Aleksandar Zvorinji ’13 has tackled  “the hardest, most puzzling problem [he] could think of”: beating the stock market. If the algorithm he has created works, Zvorinji will be able to accurately tell which stocks are worth investing in and how much to invest in them.

Zvorinji, a College Scholar in the College of Arts and Sciences, is pursuing a major in information engineering, psychology and economics and minoring in cognitive science and information science. He said he originally came up with the idea for an algorithm on the stock market when his interest was piqued by the concept of collective intelligence.

Collective intellegence can be explained by the common game of guessing an unknown number of marbles in a jar, according to Zvorinji. He said a single person’s guess is unlikely to be accurate, but if one were to take the average of the guesses of a large sample of people, that average would likely be the exact number of marbles in the jar.

However, applying this idea to the stock market is a little more complicated, Zvorinji said.

“I thought to myself … [financial analysts] all have access to the same information but report different prediction targets, so there is some skill attached to this judgment part,” he said. “If I could somehow infer this judgment process … and use that later collectively as a system, I could probably create far better predictions than any of these analysts individually.”

As of now, Zvorinji said he does not believe he has performed enough tests or taken a large enough sample size to conclusively state whether his algorithm works or not. He added, however, that the initial results have looked promising based on initial tests.

Depending on how good the algorithm proves to be, Zvorinji said it could “either be a private index that is a product that could be sold to funds” or be used to start up his own investment fund.

Zvoriniji said all of the work he has achieved was made possible through the College Scholar program, which he described as an “undergraduate Ph.D program.” Through the program, Zvorinji said he was able to take his initial idea of collective intelligence and explore it in the context of the stock market through a research project.

Zvorinji said he was originally attracted to the College Scholar program because it allowed him to create his own interdisciplinary curriculum and relieved him of the arts college’s distribution requirements. The flexibility that the program afforded Zvorinji was the same reason he said he left his native home of Sweden to study in the United States.

According to Zvorinji, the educational system in Sweden is much more rigid and required students to immediately decide their course of study.

“I don’t like being tied down, and that’s kind of what I was looking to get [in the College Scholar Program]. That’s why I came to the states — to get a liberal arts education where I do get to craft my own curriculum and mix and match,” Zvorinji said.

While at Cornell, Zvorinji said he was eager to take advantage of the many opportunities available to him. He ultimately got involved with the Cornell Consulting Club, the Mutual Investment Club of Cornell, the Scandinavian Club, and the International Students Admissions Ambassadors.

In hindsight, however, Zvorinji said he wished he had not focused heavily on being pre-professional.

“There is a very strong mentality at Cornell to be pre-professional to get jobs,” he said. “At the end of the day, if you work for Goldman Sachs or some other small boutique that no one’s ever heard of, I think that your overall happiness won’t be much bigger at any of those firms.”

After graduation, though, Zvorinji will be heading to New York City to work at Deloitte Consulting. He also plans to apply for an MBA program in addition to working on his own entrepreneurial venture.

“One thing I do know is that I want to add value to the quality of life to a lot of people,” Zvorinji said. “That’s a very Swedish mentality — very utilitarian, very inclusive — you want everybody to fare well and have a good life.”

Original Author: Gabriella Lee