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

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

#151

Post by SirLJ »

tehlike wrote: post #143
cynusx wrote: post #126

I have a much more simpler (not based on any evidence) theory which kind of explains the founders' alignment with Russian interests. Most of medaillon's returns are made with insider trading from hacking. The data science part is just come up with explanations that are complex enough and not easily disproven (e.g. find a correlating variable and explain that you had a magic algo that derived prediction from that corr…

Keeping something like this secret is... Hard.

NSA will know about this in a heartbeat

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

#152

Post by SirLJ »

dcolkitt wrote: post #90
Tycho wrote: post #5

Seems to me there's an obvious flaw in the efficient market hypothesis. It states that, essentially, you can find no sustainable edge because the market rapidly reacts to information. Meaning, if there is some information relevant to expected investment performance, investors will immediately act on it, extinguishing the information advantage. But what if the opportunity is some kind of abstract pattern that doesn't…

The efficient market hypothesis is a lot like Newtonian gravity. It's not a perfect theory, but it's a pretty close approximation that pretty much covers most any domain outside very exotic conditions. If somebody comes up to you, a random Joe Schmoe, and tells you they have an investment that consistently beats the market on a risk-adjusted basis. Well... You can pretty much guarantee that they're full of shit. Even…

The efficient market hypothesis cannot explain market bubbles happening all over the place...

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

#153

Post by peteradio »

onetimemanytime wrote: post #49
peteradio wrote: post #36

Earlier quoted context omitted.

It could be an incumbent position that is just not possible to overthrow.

Ok, new Medallion-like fund accepts lower returns, meaning its partners get better deals then under Medallion. Why wouldn't they leave Medallion? This is since 1988 apparently. I don't buy that they are the "smartest people" or that they are doing something so amazing that others don't get.

Because they would be litigated to hell. It might not even be that employees are key to this hypothetical incumbency.

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

#154

Post by SirLJ »

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…

My two cents: I think you should look into the work of Mercer, not Simons ;-)

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

#155

Post by SamBam »

ThrustVectoring wrote: post #102
SamBam wrote: post #63

Earlier quoted context omitted.

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.

No, I got that, as I stated. The issue is that half your trades are losing money, so where is that money coming from.

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

#156

Post by dang »

esoterica wrote: post #92
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…

This is pure crank nonsense.

Ok, but please don't post unsubstantive comments here. If you know more than others, the thing to do is to share some of what you know, so we can all learn something. If you don't want to do that, it's always an option to let others be wrong on the internet and move on. Calling names helps no one.

We've had to ask you about this before, so could you please review https://news.ycombinator.com/newsguidelines.html and use HN as intended? We'd appreciate it.

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

#157

Post by dereg »

bitcurious wrote: post #73
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 complements another wild theory I've heard, which is that the Medallion Fund exists to launder money from corrupt states. Say you have a $200B state pension fund - you invest a portion in the loser fund, earn a portion back as personal wealth on the winner side.

Your theory is interesting but it's just speculative fodder. Getting capacity in something like Medallion is pretty much impossible. The lowly head of a state pension fund would never have access to such capacity.

Doing this sort of thing destroys the reputation of hedge funds and is not a long-term positive expected value decision. (See Bluecrest: https://dealbook.nytimes.com/2014/05/29/fund-within-a-fund-c...)

While skepticism of Medallion is warranted, we're not doing ourselves favors by explaining away its success with activity that would have much more likely killed the firm vs sustained it.

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

#158

Post by opportune »

elliekelly wrote: post #125
SirLJ wrote: post #55

Earlier quoted context omitted.

The "only" problem with your theory is that the "sucker funds" have to lose 100 billion, which won't go unnoticed by the "suckers"

People who are looking to launder significant amounts of money would gladly sign up to be the "sucker" in this hypothetical scenario.

This would be embezzlement, not laundering right? Because you can’t exactly put $20B of dirty money into a sucker fund but you can easily do it with a fund that you control but don’t own (eg a pension fund)

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

#160

Post by texasbigdata »

SamBam wrote: post #155
ThrustVectoring wrote: post #102

Earlier quoted context omitted.

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.

No, I got that, as I stated. The issue is that half your trades are losing money, so where is that money coming from.

Exactly. If they push cash out it doesn't work.

It doesn't seem so brazen that 40 years of proprietary IP could have built something to scrape 0.00000x% of the value of something much bigger that's roughly but not exactly built on mathematical principles and is largely unexplored due to a relatively short life.

The "sovereign pump and dump" is interesting. Fund A is 20% of your assets and is "clean". Fund B raises the asset value of whatever A is invested in, and A monetizes. You could maybe even do this without the manager knowing. But it seems so crazy inefficient surely if you had a billion dollars this isn't the way you would do it.

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