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What do you think you know that other market participants don't? You can't beat the stock market by buying companies that look like they'll do well. http://le

by Eliezer 17y ago

What do you think you know that other market participants don't? You can't beat the stock market by buying companies that look like they'll do well. http://lesswrong.com/lw/yv/markets_are_antiinductive/ http://lesswrong.com/lw/yv/markets_are_antiinductive/

streety 17y ago
Wouldn't this only hold true in perfectly efficient markets? It also seems to assume that every market participant is under the same influences. I don't care how well my holdings are doing at the end of an accounting year but a fund manager likely will.
- rms 17y ago
  Try reading the linked post Eliezer linked to and see if you still have that question
  - streety 17y ago
    My comment was in response to having read the linked post. Having just finished reading it for a second time I'm still not clear. Eliezer does say, "Nobody believes the market is really "efficient" [...] but still, the market does not leave hundred-dollar-bills on the table if everyone believes in them." I'm possibly arguing against a position which has not been given but I sense there is more than this and I can't identify it.
    - rms 17y ago
      OK, then I think the answer is that yes, of course it is possible for an individual to beat the market. It just takes luck. It's nearly impossible for you to know if you are winning because you are truly better at picking stocks than the market or if it is just luck -- but most of the time, it's going to be luck. It is a very rare investor that can consistently make much more than the market as a value investor by buying and holding long.
      - streety 17y ago
        I can certainly agree with that. Not understanding that a choice can turn out well despite being made for bad reasons and vice versa is a frequent source of annoyance for me in others and, if I'm honest, myself. Thanks for the follow up.
jimbokun 17y ago
You could simply have a different motivation than most market participants. If most trades are executed considering only next year's P&L statements, but you are more interested in what happens over the next 20 years, different strategies may very well be appropriate. I like your essay on anti-inductive markets, it is often counter-intuitive how markets are different than falling apples, etc. But another thing to consider is how one might take advantage of the fact that so many market participants do not seem to understand the anti-inductiveness of markets. For example, a handful of investors made killings by finding ways to short the real estate market, at a time when many investors were treating real estate prices like falling apples.
mhb 17y ago
Summary: There are people smarter than you, with more information and with more incentive to find information than you to make whatever insight you think you have about market prices unactionable. For almost all values of you.

by Eliezer 17y ago

streety 17y ago

Wouldn't this only hold true in perfectly efficient markets? It also seems to assume that every market participant is under the same influences. I don't care how well my holdings are doing at the end of an accounting year but a fund manager likely will.

rms 17y ago
Try reading the linked post Eliezer linked to and see if you still have that question
- streety 17y ago
  My comment was in response to having read the linked post. Having just finished reading it for a second time I'm still not clear. Eliezer does say, "Nobody believes the market is really "efficient" [...] but still, the market does not leave hundred-dollar-bills on the table if everyone believes in them." I'm possibly arguing against a position which has not been given but I sense there is more than this and I can't identify it.
  - rms 17y ago
    OK, then I think the answer is that yes, of course it is possible for an individual to beat the market. It just takes luck. It's nearly impossible for you to know if you are winning because you are truly better at picking stocks than the market or if it is just luck -- but most of the time, it's going to be luck. It is a very rare investor that can consistently make much more than the market as a value investor by buying and holding long.
    - streety 17y ago
      I can certainly agree with that. Not understanding that a choice can turn out well despite being made for bad reasons and vice versa is a frequent source of annoyance for me in others and, if I'm honest, myself. Thanks for the follow up.

jimbokun 17y ago

You could simply have a different motivation than most market participants. If most trades are executed considering only next year's P&L statements, but you are more interested in what happens over the next 20 years, different strategies may very well be appropriate. I like your essay on anti-inductive markets, it is often counter-intuitive how markets are different than falling apples, etc. But another thing to consider is how one might take advantage of the fact that so many market participants do not seem to understand the anti-inductiveness of markets. For example, a handful of investors made killings by finding ways to short the real estate market, at a time when many investors were treating real estate prices like falling apples.

mhb 17y ago

Summary: There are people smarter than you, with more information and with more incentive to find information than you to make whatever insight you think you have about market prices unactionable. For almost all values of you.