21–25 of 25 posts
All investment funds are a charade. The probability that a firm like Bridgewater exists with higher than average returns is not zero. Nothing about Bridgewater would indicate that they somehow 'get it' whilst the other funds don't. It's strictly probability, or more accurately, it's strictly a bell-curve.
All investment funds are a charade. The probability that a firm like Bridgewater exists with higher than average returns is not zero. Nothing about Bridgewater would indicate that they somehow 'get it' whilst the other funds don't. It's strictly probability, or more accurately, it's strictly a bell-curve.
Also, how much diligence have you done to conclude “Nothing about Bridgewater would indicate that they somehow 'get it' whilst the other funds don't”? Have you ever evaluated their knowledge, resources, and culture vs. the market? Do you not believe they have the culture described, or do you not believe it will result in better investment returns than the market? I imagine that you don’t read Bridgewater’s Daily Observations [2]. If you did, I think you would be quite impressed and would attribute at least some of their returns to skill.
[1] Here are two references to a similar, but different, rebuttal: https://en.wikipedia.org/wiki/The_Superinvestors_of_Graham-a... http://www8.gsb.columbia.edu/alumni/news/superinvestors
[2] https://en.wikipedia.org/wiki/Bridgewater_Associates#Daily_O... Here is an example of some of their economic publishing http://www.bwater.com/Uploads/FileManager/research/how-the-e...
Earlier quoted context omitted.
Maybe I'm missing something, but how are randomness and the emh related? AFAIK random walk theory assumes the market is unpredictable and is consistent with the emh while other theories like the adaptive market hypothesis assume the opposite and are still consistent with emh.
If the EMH were true, price curves would always display maximum entropy, i.e. randomness, because there would be no spare redundant information that could be used to make predictions about the future. (This is based on Shannon's Communications Theory, but the maximal entropy bound applies to any system that mixes a predictable signal with random noise.) It doesn't matter if you use an evolutionary explanation for pri…
I'm sure people employed to predict the stock market believe they are able to predict the stock market, but as far as I'm aware it's an open question in academia.
Also, I should point out, although I do believe markets are random, the intent my original post was more to point out the parent's argument by authority.
Earlier quoted context omitted.
> If on every trade you flip a coin, but intelligently limit your losses and ride your wins What does this mean? Sounds like gambler's fallacy combined with a Martingale system
Flip a coin... heads you go long, tails you go short. Limit your losses and ride the wins. You'll kill the market (until a perfect-storm meltdown event, of course). Nothing to do with Martingale.
My instincts, and my conclusion is that there is an element of both randomness and non-randomness in the market. I would expect then that there would be both successful and non-successful actors who succeed/fail due to random and non-random factors. My gut further leads me to believe that having insight or knowledge of the market coupled with a very large bankroll would allow you to ride the random events/waves with prudent mitigation strategies. A hedge, if you would. My expectation also would be then you could measure almost any fund on some arbitrary timeline and argue that the traders either knew or didn't know what they were doing, and that because of random event XYZ they either failed to correctly predict market movement ABC over period IJK. Let's not even get into the MNO or DEF parts!