4 ms·

- No alpha (aka can't beat the market): you can only consistently beat the market if you're far better at financial analysis than a lot of people who do it ever

by rsp1984 10y ago

- No alpha (aka can't beat the market): you can only consistently beat the market if you're far better at financial analysis than a lot of people who do it every day all day. So don't bother trying. I'd argue that you can have alpha if you are better informed than everybody else. Financial analysis is the craft that comes after that. So yes, if all you have is financial analysis don't bother trying to beat the market. But if you have some unique insight, some information that the market doesn't have or doesn't see, then with some added financial analysis on top you do have an advantage that you can use to generate alpha.

ucaetano 10y ago
Sure, but insider trading is illegal. So let's say you can only rely on publicly available info, which everyone else has. Then "unique insight" is financial analysis, plus macroeconomic analysis, etc. In other words, if everyone have access to the same info, you can only consistently do better than the market by consistently having better analysis than the market. Everyone is seeing the same info, so you don't do better by seeing some piece of info others are not seeing, but by using different weights in your analysis than the market is using. And even in those cases, the market might stay irrational longer than you can stay solvent.
- rsp1984 10y ago
  You work with an oversimplifying model of reality. Say you've worked in a specific industry for a long time and you know all the players. You know where the technology is, what the challenges are and where the tech is going. You know how key companies are managed, you have an idea about their goals and strategies. You know who's best positioned for what's coming. This is just general knowledge that you've acquired through your job over the years. Now say you've made enough money and retire. Because you know a thing or two about your industry you decide to buy or sell some stock. Can this be called insider trading? Perhaps. Is it illegal? Most likely not. Can you derive alpha from it? Hell yea.
  - ForHackernews 10y ago
    Why aren't you super rich, then? If that's really true, then go do that thing you said.
    - your_ai_manager 10y ago
      Straw man
  - ucaetano 10y ago
    And how many others have done exactly the same and are writing stock picks or selling industry consulting? Again, unless you are confident that you're a better expert then everyone else, you shouldn't think you will beat the market with just public info. Now if you're saying that you keep getting updates insider information from the entire industry WHILE you're trading, well, then you're back to the "insider info" part.
your_ai_manager 10y ago
You only have to be better informed on a specific subject too. If for example your job involves buying large quantities of two brands of bananas, and you notice that one brand is consistently worse than the other. You now have some unique insight that you could use to speculate on the banana market.

by rsp1984 10y ago

ucaetano 10y ago

Sure, but insider trading is illegal. So let's say you can only rely on publicly available info, which everyone else has. Then "unique insight" is financial analysis, plus macroeconomic analysis, etc. In other words, if everyone have access to the same info, you can only consistently do better than the market by consistently having better analysis than the market. Everyone is seeing the same info, so you don't do better by seeing some piece of info others are not seeing, but by using different weights in your analysis than the market is using. And even in those cases, the market might stay irrational longer than you can stay solvent.

rsp1984 10y ago
You work with an oversimplifying model of reality. Say you've worked in a specific industry for a long time and you know all the players. You know where the technology is, what the challenges are and where the tech is going. You know how key companies are managed, you have an idea about their goals and strategies. You know who's best positioned for what's coming. This is just general knowledge that you've acquired through your job over the years. Now say you've made enough money and retire. Because you know a thing or two about your industry you decide to buy or sell some stock. Can this be called insider trading? Perhaps. Is it illegal? Most likely not. Can you derive alpha from it? Hell yea.
- ForHackernews 10y ago
  Why aren't you super rich, then? If that's really true, then go do that thing you said.
  - your_ai_manager 10y ago
    Straw man
- ucaetano 10y ago
  And how many others have done exactly the same and are writing stock picks or selling industry consulting? Again, unless you are confident that you're a better expert then everyone else, you shouldn't think you will beat the market with just public info. Now if you're saying that you keep getting updates insider information from the entire industry WHILE you're trading, well, then you're back to the "insider info" part.

your_ai_manager 10y ago

You only have to be better informed on a specific subject too. If for example your job involves buying large quantities of two brands of bananas, and you notice that one brand is consistently worse than the other. You now have some unique insight that you could use to speculate on the banana market.