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I'm not sure why you got downvoted. Survivorship bias is a well-known phenomenon. I would be interested in distinguishing between hedge funds that do well bec
by Xcelerate 11y ago
I'm not sure why you got downvoted. Survivorship bias is a well-known phenomenon. I would be interested in distinguishing between hedge funds that do well because some "necessarily must" and those that actually have some kind of advantage with their algorithms. But how can you actually tell which is the case?
- ImTalking 11y agoI don't think you can. If on every trade you flip a coin, but intelligently limit your losses and ride your wins, you will beat every fund-manager on the planet. Nothing to do with smarts or algorithms. And even if you have good risk management, if you trade long enough, there will always be the perfect-storm 'meltdown' scenario. However, as I originally said, it's all probability and there will be a small group of managers who will never experience the meltdown (or the meltdown is waiting in their future).
- mason55 11y ago> 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
- ImTalking 11y agoFlip 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.
- shitgoose 11y agoCould you elaborate on "Limit your losses and ride the wins"? Do you assume that market is trending upwards (until meltdown)? Do you suppose to make money this way in flat market?
- bosma 11y agoI recommend the book "More Money Than God" which studies the history of hedge funds and in the end suggests that successful hedge funds are not simply statistical survivors.