3 ms·

The existence of money managers who beat the market consistently is just statistics. Performance is a normal distribution.

dsacco 10y ago
This isn't good enough. As I said in another comment, quantify it for me. I want you to demonstrate with real calculations how likely it is for a firm like RenTec to arise because you got enough monkeys in a room to hit some kind of statistical critical mass. My contention is that there aren't enough professional traders or hedge funds in the world for the number of them that enjoy astronomical success to be purely a result of chance. We have clear and irrefutable evidence of firms that consistently beat the market over 10, 20 and 30 year timespans. If you want to seriously suggest that they are a normal result of statistical distribution you'll need to really quantify that. I've never seen rigorous calculations that can support that hypothesis. Moreover, I don't understand how that argument is easier to swallow than the argument that you can reliably beat the market. What is so difficult about the idea that it is possible to reliably and legally obtain material information that the rest of the market doesn't have an edge on, or that it's possible to identify predictive patterns?
- jacobr1 10y ago
  The more refined argument I've seen is that 'Alpha - Fee' is negligible, not that alpha doesn't exist. Once high-performing active managers are found they raise their fees accordingly. RenTec is one of the world's best performing funds, but also one of the most expensive. The only way to "win" with RenTec would have been to identify them BEFORE they had a proven track record. And that is much more of a gamble. Some folks have tried to address this with funds of funds. But then top performers average out and you loose most of YOUR alpha again.

3 ms·

The existence of money managers who beat the market consistently is just statistics. Performance is a normal distribution.

by monochromatic 10y ago

dsacco 10y ago
This isn't good enough. As I said in another comment, quantify it for me. I want you to demonstrate with real calculations how likely it is for a firm like RenTec to arise because you got enough monkeys in a room to hit some kind of statistical critical mass. My contention is that there aren't enough professional traders or hedge funds in the world for the number of them that enjoy astronomical success to be purely a result of chance. We have clear and irrefutable evidence of firms that consistently beat the market over 10, 20 and 30 year timespans. If you want to seriously suggest that they are a normal result of statistical distribution you'll need to really quantify that. I've never seen rigorous calculations that can support that hypothesis. Moreover, I don't understand how that argument is easier to swallow than the argument that you can reliably beat the market. What is so difficult about the idea that it is possible to reliably and legally obtain material information that the rest of the market doesn't have an edge on, or that it's possible to identify predictive patterns?
- jacobr1 10y ago
  The more refined argument I've seen is that 'Alpha - Fee' is negligible, not that alpha doesn't exist. Once high-performing active managers are found they raise their fees accordingly. RenTec is one of the world's best performing funds, but also one of the most expensive. The only way to "win" with RenTec would have been to identify them BEFORE they had a proven track record. And that is much more of a gamble. Some folks have tried to address this with funds of funds. But then top performers average out and you loose most of YOUR alpha again.