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Medallion Fund “Stretches Explanation to the Limit,” Professor Claims

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101–110 of 195 posts

Re: Medallion Fund “Stretches Explanation to the Limit,” Professor Claims

#101

Post by FiberBundle »

dogman144 wrote: post #82
logicchains wrote: post #62

Earlier quoted context omitted.

>Why are they better? Possible explanation: there aren't any other firms founded by as great mathematicians as the founders of Renaissance. I saw a quote online attributed to them, something like: "We hire the A-grade mathematicians. Most other firms hire B and C grade mathematicians, and don't even know the A grade exists". This fits my experience, as a D-grade mathematician working in finance. Never heard of signif…

Haha this was basically LTCM's publicly stated approach, to be fair.

They were economists... Which might explain the outcome.

Re: Medallion Fund “Stretches Explanation to the Limit,” Professor Claims

#102

Post by ThrustVectoring »

SamBam wrote: post #63
jjoonathan wrote: post #39

Of the wild theories I've heard to explain the Medallion Fund, my favorite is the "money wormhole." I have no finance qualifications whatsoever -- I just stick my money in index funds -- but I love a good conspiracy theory, so here goes. The idea is that you have two theoretically unrelated funds that take complementary positions with uneven odds. One sacrifices performance for the other, effectively transmitting mon…

I'm not sure I understand your suggestion. So there are (simplistically) two funds, Sucker and Winner. They take complementary positions, and, whichever one wins gets transferred to Winner. So far so good. Winner is winning every bet, and Sucker is losing every bet. Now you need people to put money into Sucker, because it has to come out the other end into Winner. How do you convince them to do that? By giving them a…

It's simpler than you think. You take a pair of offsetting trades, and later you re-write history to book the losing trade on Sucker and the winning trade on Winner.

Re: Medallion Fund “Stretches Explanation to the Limit,” Professor Claims

#103

Post by RookyNumbas »

jjoonathan wrote: post #39

Of the wild theories I've heard to explain the Medallion Fund, my favorite is the "money wormhole." I have no finance qualifications whatsoever -- I just stick my money in index funds -- but I love a good conspiracy theory, so here goes. The idea is that you have two theoretically unrelated funds that take complementary positions with uneven odds. One sacrifices performance for the other, effectively transmitting mon…

This would only explain the performance for the last 10 years. There were no "sucker" funds for the first 20.

Re: Medallion Fund “Stretches Explanation to the Limit,” Professor Claims

#104

Post by ThrustVectoring »

fyp wrote: post #53
jjoonathan wrote: post #39

Of the wild theories I've heard to explain the Medallion Fund, my favorite is the "money wormhole." I have no finance qualifications whatsoever -- I just stick my money in index funds -- but I love a good conspiracy theory, so here goes. The idea is that you have two theoretically unrelated funds that take complementary positions with uneven odds. One sacrifices performance for the other, effectively transmitting mon…

It's an interesting idea. You can make two funds sum up to a constant by taking opposite and equal positions. But I am not seeing how you can control the direction the money moves. For example if you knew fund A will gain $x and fund B will lose $x, shouldn't you simply not make the trade in fund B?

You decide which fund has which position after it books profits and losses.

Re: Medallion Fund “Stretches Explanation to the Limit,” Professor Claims

#105

Post by sweeneyrod »

codingslave wrote: post #3

Investing is like tech, its winner take all. This is like being surprised that Google dominates search

No, it's the exact opposite. The limit of how much money you can put through a given strategy mean there is an antieconomy of scale that encourages lots of small firms.

Re: Medallion Fund “Stretches Explanation to the Limit,” Professor Claims

#106

Post by throwlaplace »

orbifold wrote: post #50

My long standing hypothesis on Medallion is that they figured out how to apply gauge theoretic techniques to financial markets. This fits with Simons work that he did before he founded the fund. The fact that gauge theory is applicable to for example currency trading is folk knowledge in the Havard, Princeton, IAS circles (here is for example the lecture notes of a popular lecture by Maldacena that uses currency trad…

change of gauge just means a rescaling. of course currency is the perfect example of a change of gauge for an expository piece like that arxiv paper (it's relatable). it doesn't mean there's some fundamental relationship to gauge theory to markets. arb free here gets encoded as the curl of the connection being 0 but that's just saying you can't loop through the currencies and come out with more money. it's tautological given your identifications - you get no further insight using the gauge theory. and besides the connection is continuous and currency swaps aren't.

you make the typical mistake of someone that knows a lot of math: you go up the ladder of abstraction from an example and think that the abstraction says something about the example. it doesn't - you've just hidden the simplicity of the example under the mathematical baggage.

Re: Medallion Fund “Stretches Explanation to the Limit,” Professor Claims

#107

Post by JackFr »

jjoonathan wrote: post #39

Of the wild theories I've heard to explain the Medallion Fund, my favorite is the "money wormhole." I have no finance qualifications whatsoever -- I just stick my money in index funds -- but I love a good conspiracy theory, so here goes. The idea is that you have two theoretically unrelated funds that take complementary positions with uneven odds. One sacrifices performance for the other, effectively transmitting mon…

That makes perfect sense. Renaissance has always been immune to the claims that it's a Ponzi scheme, because Medallion is closed. But if you used the wormhole techniques to move money from the open to the closed, and voila, unbelievably high returns!

Re: Medallion Fund “Stretches Explanation to the Limit,” Professor Claims

#108

Post by RookyNumbas »

papln wrote: post #65
RookyNumbas wrote: post #41

Earlier quoted context omitted.

No, the medallion fund existed for 20 years before these other funds were opened.

Was Medallion fund Rentec's only business, or was there other business they could skim from?

James Simons had a funds for tech startups. But it wasn't nearly large enough to support the kind of profits that happened.

Re: Medallion Fund “Stretches Explanation to the Limit,” Professor Claims

#109

Post by RookyNumbas »

nateburke wrote: post #14

How big are the external funds? If they are large enough, it wouldn't be hard (quantitatively) to shave a percent or two off of their returns in bad medallion years to keep the winning streak alive. The inflows inspired by the mystique shrouding medallion alone could make this easy

The medallion fund had 20 years of performance before the other funds existed.

Re: Medallion Fund “Stretches Explanation to the Limit,” Professor Claims

#110

Post by RookyNumbas »

stanferder wrote: post #100
jandrewrogers wrote: post #68

Earlier quoted context omitted.

Even without knowing the full details, their returns are quite plausible if you have less speculative knowledge of their business. The challenge for most hedge funds is that any "edge" they find decays over time, often quickly, which leaves them scrambling to find a new edge that will allow them to outperform the market. Most hedge funds go to a lot of effort to preserve an edge to the extent they can. Renaissance fo…

I find it really hard to believe that the fund can be generating returns so consistently by pursuing a variety of different strategies over time. It seems very unlikely that Renaissance/Medallion constantly finds these things, whereas other operations almost never do. The conspiracy theorist in the back of my brain thinks that Renaissance/Medallion hires a lot of eggheads so they can plausibly claim to keep finding m…

These eggheads (very) occasionally move to other firms and see similar returns. Of course rentech then sues those other firms for all the profits they make. And they win.
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