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Wow, this is the height of hubris. Of course luck can play a factor. There's no law of the universe that a correlation you observe over the past century of hu

Wow, this is the height of hubris. Of course luck can play a factor. There's no law of the universe that a correlation you observe over the past century of human activity is going to hold indefinitely. Obviously some quant funds have better models than others and it's not wrong to attribute that to intelligence and skill, but they absolutely can have the rug pulled out from under them by changing market conditions make no mistake.

lordnacho 10y ago
They trade very, very often. You can be lucky if you buy a couple of stocks and wait around a few years. Someone I know had parents who bought Nokia in the 1980s and sat on it until the mid 200s. That's luck. You can guess a coin flip 5 times in a row. A few people out of a hundred will do so. But you cannot get significantly over 50% correct on millions of coin flips. That's not luck.
- dasil003 10y ago
  First of all, I explicitly said that it's not wrong to attribute winners to skill, but you still feel the need to put my argument in a binary box, very well. Your mistake is treating each trade as an independent event. But in reality all those trades may share a single methodology which can be invalidated by a single unprecedented market change. Yeah, a fund is a perennial winner until it's not. You can call it being unlucky or you can say they went from being smart to stupid. It doesn't really matter what you call it, the point is past performance is no guarantee of future returns.
  - lordnacho 10y ago
    >>Your mistake is treating each trade as an independent event. They largely are. The people who fall under your criticism are the old school stock pickers. For instance, people who've grown up during the long decline of inflation and rates might have hit a wall over the last few years. A lot of those guys were essentially riding the same wave over multiple trades. But the kind of trading done in stat arb is largely independent of such long term trends. They change around their positions so often that there's hardly any regime that they are biased towards. High vol? Been long and short. Rates going up/down? Been long and short. Economy? Been long and short. Sure, there might be some hidden regime that we've yet to hear about, that's possible. But there's quite a difference between the quantitatively astute funds and the other long-lived ones.
    - dasil003 10y ago
      Sorry, not drinking your koolaid. Any exploitable "stat arb" will go to zero as it's exploited, or if it grows large it will move the market. There are no statistical axioms which are guaranteed to make you money, because if there were it would change once enough people discovered it. Anyone that's far out enough ahead can find these things for a while, but there's no way the average investor ever gets close to it, they're not exactly cold-calling senior citizens with these amazing opportunities.

lordnacho 10y ago

They trade very, very often. You can be lucky if you buy a couple of stocks and wait around a few years. Someone I know had parents who bought Nokia in the 1980s and sat on it until the mid 200s. That's luck. You can guess a coin flip 5 times in a row. A few people out of a hundred will do so. But you cannot get significantly over 50% correct on millions of coin flips. That's not luck.

dasil003 10y ago
First of all, I explicitly said that it's not wrong to attribute winners to skill, but you still feel the need to put my argument in a binary box, very well. Your mistake is treating each trade as an independent event. But in reality all those trades may share a single methodology which can be invalidated by a single unprecedented market change. Yeah, a fund is a perennial winner until it's not. You can call it being unlucky or you can say they went from being smart to stupid. It doesn't really matter what you call it, the point is past performance is no guarantee of future returns.
- lordnacho 10y ago
  >>Your mistake is treating each trade as an independent event. They largely are. The people who fall under your criticism are the old school stock pickers. For instance, people who've grown up during the long decline of inflation and rates might have hit a wall over the last few years. A lot of those guys were essentially riding the same wave over multiple trades. But the kind of trading done in stat arb is largely independent of such long term trends. They change around their positions so often that there's hardly any regime that they are biased towards. High vol? Been long and short. Rates going up/down? Been long and short. Economy? Been long and short. Sure, there might be some hidden regime that we've yet to hear about, that's possible. But there's quite a difference between the quantitatively astute funds and the other long-lived ones.
  - dasil003 10y ago
    Sorry, not drinking your koolaid. Any exploitable "stat arb" will go to zero as it's exploited, or if it grows large it will move the market. There are no statistical axioms which are guaranteed to make you money, because if there were it would change once enough people discovered it. Anyone that's far out enough ahead can find these things for a while, but there's no way the average investor ever gets close to it, they're not exactly cold-calling senior citizens with these amazing opportunities.