70% of all stocks traded are held for 11 seconds and other BS

I admit I’m an NPR listener, and recently I heard something astonishing.  70% of all stocks traded are held for an average of just 20 seconds.  Really?

In the title of this blog I quote Peter Cohan at AOL Daily Finance, with an 11 second average.  Sure the numbers are different, but whether it’s 11 seconds or 20 seconds, this is astonishing.  The NPR  story and Peter Cohan were describing the high frequency computer trading programs (HFT for short) that are increasingly used by some traders.

But I doubt this number is correct.  The first reason is the word “average”.  The average of all held stocks would include stocks that are held for 10 years.  We can’t calculate those holds until they sell. Maybe we want the “median” anyway, on the assumption that the distribution is not a normal distribution.  But whatever, statistics are boring.

The other reason I have doubts about these quotes is that the answer is unknowable.  The data is not reported or tracked by the exchanges.  In the stories I’ve found online, there is no backup data.

But I did find this off-the-cuff comment quoted in in the New York Times:

These are short-term bets. Very short. The founder of Tradebot, in Kansas City, Mo., told students in 2008 that his firm typically held stocks for 11 seconds. Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said

Look familiar?  11 seconds.  As a fellow professor I can tell you:  don’t rely on off-the-cuff comments of classroom guest speakers.

Oh wait, another quote in the Financial Times:

I know of one HFT firm operated out of the west coast of the US that boasts its average holding period for US equities is 11 seconds

Whaddya know.  11 seconds.  ”Boasting” 11 seconds, actually, not “confirming” or even “announcing”.

In this day of seemingly infinite fact checking at our fingertips, of WikiLeaks, and of every comment/gaffe living forever on YouTube, I had hopes that Interesting-But-Fabricated data could be easily identified and ignored.  The equivalent of noisy chaffe in our signal of wheat.

I was wrong.  We’re as gullible as ever.  And so, apparently, is NPR.

If only we had an education system that would help us out.  Instead, according to Gallup polling one in five Americans:

• Believe President Obama is a Muslim.
• Believe the Sun revolves around the Earth.
• Don’t know that the US gained it’s independence from the country of England.

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