I didn't know I had a predictive module!!! I thought it was common sense.
Clearly we should not discount the value of "Common Sense," in predicting future events (e.g., price changes). It's the survival value of common sense that makes it so common.
So, you have an informal theory regarding the effect of a certain Independent Variable: Measured Difference in Discount/Premium); and, its effect on some Dependent Variable defined as the change in the trading price difference between two correlated securities. You are attempting the simultaneous buying and selling of a set of security at two different prices in two different markets, resulting in profits without risk. However, "Common Sense" would suggest that you are not able to do this perfectly.
Although the theory of arbitrage may be common sense. Its effective implementation and operational execution is not common. It is the Theory that you can actually do this given the tools and information you currently have available that is NOT common sense.
If there was some way to prove 'its' predictive value and quantify its benefit, is that something you would want to do? By 'its' I mean your entire operationalization of your Trading System (i.e., The Theory).
P.S. OK, INFO_DART, now come clean!
Okay. Using INFOrmation to make more effective decisions than throwing DARTs.
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