The problem is, what do you mean by the Wiktionary entry is clearly wrong? They seem pretty reasonable to this layman. Do you mean that they do not exclude every meaning including the possibility of loss? By what authority is this open-mindedness ‘wrong’? Did Jehovah in some obscure Numbers passage lay down this rule? Or is it just that you always use ‘arbitrage’ in the no-possible-loss sense, and so it’s incorrect for anyone else to use it any other way?
I hold to a descriptivist view of language; the use of a language is its meaning. If people use arbitrage in senses which allow loss, then arbitrage can mean techniques which allow loss. (Such techniques are a superset of techniques which don’t allow loss, so it’s fair to call the narrower no-loss definitions ‘strong’ definitions, along the lines of the Strong and Weak AI hypotheses, for example.) At that point, all I need to do is show that the other meanings are widespread. Wikipedia has it, and serves it up to ~1,600 viewers a day; Wiktionary probably adds a few hundred hits to that. The Google Books has hits that explicitly point out that they will henceforth use ‘arbitrage’ in its narrow sense; other books simply define it in a broad sense. The News hits demonstrate that the wider meanings are likewise in widespread use. (Your Google search has no relevance, any more than if I had instead said ‘bgrah449 is using the narrow definition of abitrage’, which ironically actually has a non-LW hit.)
But what was described, in the article and in the comment, is entirely the wrong use of the word “arbitrage.”
Long-Term Capital Management, from the popular history books I’ve read on them (and 1 or 2 academic articles long ago), did not believe it was an overall arbitrage. Arbitrages in the risk-free sense were taken when they found them, but much of their business was looking for mismatches which were not risk-free, but which they could exploit with leverage and hedge themselves against. They figured that they could only be killed by century-events or rarer. If they were just risk-free arbitraging, then they could never have been killed; if you can have losses on a risk-free arbitrage, an arbitrage in the narrow sense, then it’s not such an arbitrage, by definition.
Thus, bringing up the strategy of diversification, and LTCM in particular, only makes sense if mattnewport was thinking of arbitrage in the broader sense. (How can 100 risk-free arbitrages across the global economy be any safer than 100 risk-free arbitrages in just the USA? 100 0 = 100 0.) This was my original point: you and Blueberry both seemed (to me) to be discussing narrow/strong arbitrages, and mattnewport was putting forth a broad/weak arbitrage.
So I can’t help but conclude that your “a word can have many meanings” idea is just an applause light.
Ironically, ‘applause light’ can itself be an applause light.
Statistical arbitrage is named thus because over an infinite time period, it is arbitrage.
I don’t think so. I think “Statistical arbitrage” is marketing. As long as there is risk of ruin statistical arbitrage is still risky, even over infinite time. LTCM isn’t going to show a profit ever.
The problem is, what do you mean by the Wiktionary entry is clearly wrong? They seem pretty reasonable to this layman. Do you mean that they do not exclude every meaning including the possibility of loss? By what authority is this open-mindedness ‘wrong’? Did Jehovah in some obscure Numbers passage lay down this rule? Or is it just that you always use ‘arbitrage’ in the no-possible-loss sense, and so it’s incorrect for anyone else to use it any other way?
I hold to a descriptivist view of language; the use of a language is its meaning. If people use arbitrage in senses which allow loss, then arbitrage can mean techniques which allow loss. (Such techniques are a superset of techniques which don’t allow loss, so it’s fair to call the narrower no-loss definitions ‘strong’ definitions, along the lines of the Strong and Weak AI hypotheses, for example.) At that point, all I need to do is show that the other meanings are widespread. Wikipedia has it, and serves it up to ~1,600 viewers a day; Wiktionary probably adds a few hundred hits to that. The Google Books has hits that explicitly point out that they will henceforth use ‘arbitrage’ in its narrow sense; other books simply define it in a broad sense. The News hits demonstrate that the wider meanings are likewise in widespread use. (Your Google search has no relevance, any more than if I had instead said ‘bgrah449 is using the narrow definition of abitrage’, which ironically actually has a non-LW hit.)
I would disagree here. The article, perhaps, but the comment to which I was responding was clearly using the broader definitions: http://lesswrong.com/lw/1ia/arbitrage_of_prediction_markets/1b12
Long-Term Capital Management, from the popular history books I’ve read on them (and 1 or 2 academic articles long ago), did not believe it was an overall arbitrage. Arbitrages in the risk-free sense were taken when they found them, but much of their business was looking for mismatches which were not risk-free, but which they could exploit with leverage and hedge themselves against. They figured that they could only be killed by century-events or rarer. If they were just risk-free arbitraging, then they could never have been killed; if you can have losses on a risk-free arbitrage, an arbitrage in the narrow sense, then it’s not such an arbitrage, by definition.
Thus, bringing up the strategy of diversification, and LTCM in particular, only makes sense if mattnewport was thinking of arbitrage in the broader sense. (How can 100 risk-free arbitrages across the global economy be any safer than 100 risk-free arbitrages in just the USA? 100 0 = 100 0.) This was my original point: you and Blueberry both seemed (to me) to be discussing narrow/strong arbitrages, and mattnewport was putting forth a broad/weak arbitrage.
Ironically, ‘applause light’ can itself be an applause light.
For the record, I was indeed thinking of statistical arbitrage.
The Wiktionary entry is clearly wrong in that it isn’t a definition at all. The definition of “running” isn’t “what you do at a marathon.”
1,600 people a day doesn’t change the meaning of a word.
Statistical arbitrage is named thus because over an infinite time period, it is arbitrage.
Yes it does. Bgrah449, meet human language.
I don’t think so. I think “Statistical arbitrage” is marketing. As long as there is risk of ruin statistical arbitrage is still risky, even over infinite time. LTCM isn’t going to show a profit ever.