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> "A Random Walk Down Wall Street" is real. reply It's a real book, but it doesn't prove the market is random, nothing does as the efficient market hypothesis
by gnaritas 10y ago
> "A Random Walk Down Wall Street" is real.
reply
It's a real book, but it doesn't prove the market is random, nothing does as the efficient market hypothesis is just that, an unproven hypothesis lacking even enough evidence to become a working theory.
That certain funds consistently beat the market year in and year out for decades is enough to disprove the notion that markets are random; they're not.
- drjesusphd 10y agoThat doesn't prove a damn thing. When so many people are playing, there's bound to be some that consistently win, just by chance alone. The book discusses this.
- trentmb 10y agohttp://dilbert.com/strip/2001-10-25 http://dilbert.com/strip/2001-10-25
- tcoppi 10y agoAnd there are statistics tests one can use to determine if one's performance meets those statistical parameters to be random. Many funds and managers beat it over the long term, such as Warren Buffet, but the vast majority indeed do not.
- refurb 10y agoWarren Buffet usually invests to the extent that he has the power to change how the company is run. He usually uses that power.
- tcoppi 10y agoDoes that change my thesis at all?
- refurb 10y agoI was just drawing the distinction between beating the market through passive investing (simple stock picking) vs. what Warren Buffet does.
- nomailing 10y agoIn addition to that, there might be an effect due to the media hype around investments of Warren Buffet. People see in the news that Buffet invested in companyXYZ so they think that must be a smart idea and also invest in the same company and therefore driving the price higher...
- gnaritas 10y agoOver any one year, sure, even over a few years, sure, but when you see consistent winners over decades in numbers that exceed what random chance would expect, it's foolish to still insist the market is random other that it being a good way to sell books. I know what the book discusses, and the book is an unproven hypothesis, it doesn't need to be disproven as it has never been proven in the first place. That markets are random is a hypothesis only; one lacking sufficient evidence to declare it a theory. No one has proven markets are random and that's where the burden of proof lies.
- drjesusphd 10y agoShow me an example of someone repeatedly beating the market, year after year, for decades. Besides, even that is "only" a one in a million chance. How many people trade on the stock market?
- icebraining 10y agoFrom what I remember from the book, the claim is not that nobody can beat the market; it's that you can't distinguish them from lucky winners. By the way, which funds have beaten the market for decades?
- gnaritas 10y ago> it's that you can't distinguish them from lucky winners. Jim Simmons doesn't agree, see Renaissance Technologies as an example. And time would week out lucky winners; luck isn't consistent over long time periods and this is just one example.
- gakada 10y agoRenaissance Tech? Clearly at some level of expenditure you can beat risk/return of the market, but it doesn't necessarily scale either up or down. You need enough money to hire your army of PhDs, but not so much money that it starts to affect the market. edit: heh, snap.
- ahupp 10y agoThe claim of the book is that you, as a regular investor, do not have access to better-than-market returns, not that they are not possible. Anyone who can provide better returns will claim the difference for themselves (in fees) rather than pass it on to you. Why would they give you free money?
- mysterypie 10y agoLet's say that funds X, Y, and Z can regularly beat the market. Fund X then passes on better returns to its customers, and therefore gets more customers. Then Y and Z have to do the same thing, otherwise they lose customers. Simple competition. Are you saying the above won't happen?