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They use big data techniques to find weak correlation in data and invest moderate amounts of money in them. They never make a large return on any given investm
by Lazare 10y ago
They use big data techniques to find weak correlation in data and invest moderate amounts of money in them. They never make a large return on any given investment, but they make very persistent returns; over the long run this adds up.
The limiting factor behind what they do is that it doesn't scale.
> How did these guys make 98.5% in 2000 and 33% in 2001 in the depths of the .com collapse of Wall Street?
The name "hedge fund" comes from the concept of a hedge; a strategy that will underperform in good times, but over perform in bad ones. 2001 is the exact time you'd expect a hedge fund to do well, especially one focused on dispassionate data analysis.
- nabla9 10y agoThis is good answer. It's also how profitable sports betting syndicates work. Lots of small bets with relatively low expected value. 1% expected return per week is 70% return in a year. You can't scale the syndicate above certain limit.
- fma 10y agoIt was said before, they don't predict every word in a book. But if they see "New York" in a sentence they will bet the third word is "City".