7 ms·

Statistician here with experience in the financial world: you're wrong. Don't confuse the existence of Wikipedia pages and books written by people wanting to ma

Statistician here with experience in the financial world: you're wrong. Don't confuse the existence of Wikipedia pages and books written by people wanting to make money with actual science. Moving averages have a function in statistics. But there is no evidence that they can be used to time the markets. If they could, it would be done algorithmically by hedge funds, closing the possibility. Please show actual analysis of market data (i.e. recent published scientific papers) supporting your positions. Without those, it's quackery.

meeper16 11y ago
Hedge fund algorithm developer here. You misread: 1. The existence of mathematica was quoted first. 2. Moving averages are a "lagging indicator", which I stated, not a predictive indicator which I did not state. 3. I develop hedge fund algorithms. References to papers include this most important one: "Contagious Speculation and a Cure for Cancer: A Non-Event that Made Stock Prices Soar," https://www0.gsb.columbia.edu/faculty/ghuberman/research.html https://www0.gsb.columbia.edu/faculty/ghuberman/research.htm...
- jevgeni 11y ago
  > 3. I develop hedge fund algorithms. Do the hedge funds know? ;P
  - meeper16 11y ago
    Our bank accounts do.
    - tsotha 11y ago
      Until they don't. As a group, hedge funds far underperform index funds.
      - meeper16 11y ago
        Algorithms degrade, we optimize. We're in the top 25. They last longer than more full time jobs.
lordnacho 11y ago
I've been working in hedge funds for over a decade, and it's interesting what the variety of opinions is. There's a great deal of secrecy, and good reasons for it, so getting to know how other quants do things has been quite informative. On the one hand, your arbitrage argument makes sense. If there existed a simple strategy that made money, it would be traded out of existence. On the other hand, I happen to know how the major quantitative funds allocate their money. It is a simple formula, with a number of small twists. (Yes, people will not believe you if you claim this. Rightly so.) Now, how can these facts coexist? The answer is that the formula "sort of works". There are long periods where it doesn't work, and periods where the returns are phenomenal. If someone were to start a new fund, they would have a number of issues: - It is just not quite believable that such a simple formula is profitable. What are those hordes of phds actually doing? (Squeezing a lemon actually). Surely someone else would have found it? - Institutional investors have all sorts of issues with investing. It's done by committee. They need you to have a long track record. They want all the right boxes checked. - What happens if you launch and you start with a fallow period? - Even if a simple formula works, why does it work? Are you happy to trade something that you don't really understand?
- meeper16 11y ago
  I've been on the hedge fund algo side for years. You're spot on and it's what a lot of these guys on this thread are clueless about. Basic or simple approaches can be combined with others and be statistically/mathematically sound and robust. Some work for periods of time, some don't, some stop working. Algorithms degrade over time and that's continued optimization is a must. Case and point: LTCM and the story behind black scholes algo running up against a black swan. I'd highly recommend watching this for the others reading this thread that really just are familiar with the whole space: https://www.youtube.com/watch?v=lmvxZgnwwD4 https://www.youtube.com/watch?v=lmvxZgnwwD4
  - jevgeni 11y ago
    > black scholes algo Black Scholes isn't an "algo". Sweet mother of god...

meeper16 11y ago

Hedge fund algorithm developer here. You misread: 1. The existence of mathematica was quoted first. 2. Moving averages are a "lagging indicator", which I stated, not a predictive indicator which I did not state. 3. I develop hedge fund algorithms. References to papers include this most important one: "Contagious Speculation and a Cure for Cancer: A Non-Event that Made Stock Prices Soar," https://www0.gsb.columbia.edu/faculty/ghuberman/research.html https://www0.gsb.columbia.edu/faculty/ghuberman/research.htm...

jevgeni 11y ago
> 3. I develop hedge fund algorithms. Do the hedge funds know? ;P
- meeper16 11y ago
  Our bank accounts do.
  - tsotha 11y ago
    Until they don't. As a group, hedge funds far underperform index funds.
    - meeper16 11y ago
      Algorithms degrade, we optimize. We're in the top 25. They last longer than more full time jobs.

lordnacho 11y ago

I've been working in hedge funds for over a decade, and it's interesting what the variety of opinions is. There's a great deal of secrecy, and good reasons for it, so getting to know how other quants do things has been quite informative. On the one hand, your arbitrage argument makes sense. If there existed a simple strategy that made money, it would be traded out of existence. On the other hand, I happen to know how the major quantitative funds allocate their money. It is a simple formula, with a number of small twists. (Yes, people will not believe you if you claim this. Rightly so.) Now, how can these facts coexist? The answer is that the formula "sort of works". There are long periods where it doesn't work, and periods where the returns are phenomenal. If someone were to start a new fund, they would have a number of issues: - It is just not quite believable that such a simple formula is profitable. What are those hordes of phds actually doing? (Squeezing a lemon actually). Surely someone else would have found it? - Institutional investors have all sorts of issues with investing. It's done by committee. They need you to have a long track record. They want all the right boxes checked. - What happens if you launch and you start with a fallow period? - Even if a simple formula works, why does it work? Are you happy to trade something that you don't really understand?

meeper16 11y ago
I've been on the hedge fund algo side for years. You're spot on and it's what a lot of these guys on this thread are clueless about. Basic or simple approaches can be combined with others and be statistically/mathematically sound and robust. Some work for periods of time, some don't, some stop working. Algorithms degrade over time and that's continued optimization is a must. Case and point: LTCM and the story behind black scholes algo running up against a black swan. I'd highly recommend watching this for the others reading this thread that really just are familiar with the whole space: https://www.youtube.com/watch?v=lmvxZgnwwD4 https://www.youtube.com/watch?v=lmvxZgnwwD4
- jevgeni 11y ago
  > black scholes algo Black Scholes isn't an "algo". Sweet mother of god...