5 ms·

Probably just help verify that the stock market is a random walk with a meager trend upwards that doesn't beat inflation + trading costs.

matheweis 10y ago
> the stock market is a random walk with a meager trend upwards that doesn't beat inflation + trading costs. That assumes that the efficient-market hypothesis holds true, but it has yet to be thoroughly proven or disproven... (and funds like Medallion would strongly suggest otherwise for the medium term: https://www.bloomberg.com/news/articles/2016-11-21/how-renaissance-s-medallion-fund-became-finance-s-blackest-box https://www.bloomberg.com/news/articles/2016-11-21/how-renai...)
- dandermotj 10y ago
  It doesn't assume the Effiecient Market hypothesis - empirical studies of returns support random returns without the imposing a model (non-parametric tests). That's not to say returns are actually random, but in any given time range, it appears to be.
  - matheweis 10y ago
    EMH and random walk theory are intrinsically linked; you can't have one without the other... Or are you saying that movements aren't actually random, and only appear to be?
    - dandermotj 10y ago
      The latter
- deleted 10y ago
  [deleted]
etjossem 10y ago
> Probably just help verify that the stock market is a random walk with a meager trend upwards that doesn't beat inflation + trading costs. That doesn't sound right. Let me clear that up for you. Since 1950: S&P 500 Annual Price Change: 7.2% S&P 500 Annual Div Dist: 3.6% S&P 500 Annual Total Return: 11.0% Annual Inflation: 3.8% Annual Real Price Change: 3.3% Annual Real Total Return: 7.0 % Buying the straight S&P 500 beats inflation by seven percent, on average, every year. You're welcome!
- justonepost 10y ago
  You don't need prophet for that.
  - etjossem 10y ago
    :)
- T-A 10y ago
  Buying the S&P 500 in 1950 and holding 67 years does. One sample tells you nothing about randomness. What if you buy in August 1929? What if you hold for a more realistic 20 or 30 years from peak earning years to retirement?
  - etjossem 10y ago
    Bought way back in August 1929: Annual Total Return: 9.1% Annual Real Total Return: 5.9% Bought in January 1987, held for a realistic 30 years: Annual Total Return: 9.8% Annual Real Total Return: 7.0% There's always going to be some deviation, but over any given multi-decade holding period, you will generally end up with a predictable 5-9% annualized (inflation-adjusted) return. That is more than zero. My point stands: long-term investment in the S&P 500 can be reasonably expected to gain value faster than inflation. If you're interested, here's a simulator that looks at historic market data. You'll note that even the lowest possible percentile of 30-year holding periods will still yield a 3.43% inflation-adjusted total return: https://dqydj.com/sp-500-historical-return-calculator-popout/ https://dqydj.com/sp-500-historical-return-calculator-popout...
ainiriand 10y ago
Some people are making pretty penny for being so random.
- icebraining 10y ago
  The same could be said about the lottery.

matheweis 10y ago

> the stock market is a random walk with a meager trend upwards that doesn't beat inflation + trading costs. That assumes that the efficient-market hypothesis holds true, but it has yet to be thoroughly proven or disproven... (and funds like Medallion would strongly suggest otherwise for the medium term: https://www.bloomberg.com/news/articles/2016-11-21/how-renaissance-s-medallion-fund-became-finance-s-blackest-box https://www.bloomberg.com/news/articles/2016-11-21/how-renai...)

dandermotj 10y ago
It doesn't assume the Effiecient Market hypothesis - empirical studies of returns support random returns without the imposing a model (non-parametric tests). That's not to say returns are actually random, but in any given time range, it appears to be.
- matheweis 10y ago
  EMH and random walk theory are intrinsically linked; you can't have one without the other... Or are you saying that movements aren't actually random, and only appear to be?
  - dandermotj 10y ago
    The latter
deleted 10y ago
[deleted]

etjossem 10y ago

> Probably just help verify that the stock market is a random walk with a meager trend upwards that doesn't beat inflation + trading costs. That doesn't sound right. Let me clear that up for you. Since 1950: S&P 500 Annual Price Change: 7.2% S&P 500 Annual Div Dist: 3.6% S&P 500 Annual Total Return: 11.0% Annual Inflation: 3.8% Annual Real Price Change: 3.3% Annual Real Total Return: 7.0 % Buying the straight S&P 500 beats inflation by seven percent, on average, every year. You're welcome!

justonepost 10y ago
You don't need prophet for that.
- etjossem 10y ago
  :)
T-A 10y ago
Buying the S&P 500 in 1950 and holding 67 years does. One sample tells you nothing about randomness. What if you buy in August 1929? What if you hold for a more realistic 20 or 30 years from peak earning years to retirement?
- etjossem 10y ago
  Bought way back in August 1929: Annual Total Return: 9.1% Annual Real Total Return: 5.9% Bought in January 1987, held for a realistic 30 years: Annual Total Return: 9.8% Annual Real Total Return: 7.0% There's always going to be some deviation, but over any given multi-decade holding period, you will generally end up with a predictable 5-9% annualized (inflation-adjusted) return. That is more than zero. My point stands: long-term investment in the S&P 500 can be reasonably expected to gain value faster than inflation. If you're interested, here's a simulator that looks at historic market data. You'll note that even the lowest possible percentile of 30-year holding periods will still yield a 3.43% inflation-adjusted total return: https://dqydj.com/sp-500-historical-return-calculator-popout/ https://dqydj.com/sp-500-historical-return-calculator-popout...

ainiriand 10y ago

Some people are making pretty penny for being so random.

icebraining 10y ago
The same could be said about the lottery.