Particle Swamp Optimization (PSO): Does Wisdom of the Crowd work in Investing?
What is PSO and how was it used here? Particle Swarm Optimization (PSO) is a computational method inspired by the way groups of animals, like birds or fish, move together in search of food. If you see a swarm of drones doing a light display or videos of wild geese flying in formation, or a school of fish moving as one superorganism when alarmed that’s PSO. In other words, PSO embodies the old adage of “Wisdom of the Crowd. In finance, PSO is used to find the best mix of investments by simulating a "swarm" of possible portfolios, each adjusting its mix based on both its own experience and the experience of others in the swarm. PSO and the “wisdom of the crowd” in Finance is not unlike the real-life practice of following the crowd, listening to rumours and over-reaction to extreme changes in the market environment. Does Wisdom of the Crowd work in Investing? In this project, the swarm was made up of individual investors. The buy sell rules and prices were decid...