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By definition an outlier as one of the most successful funds of all time. Also "The firm bought out the last investor in the Medallion fund in 2005 and the inve

By definition an outlier as one of the most successful funds of all time. Also "The firm bought out the last investor in the Medallion fund in 2005 and the investor community has not seen its returns since then"

downandout 9y ago
Nevertheless, it is a fund that has beaten the markets consistently. I was just saying that it is possible to do, so the entire industry is not the sham that most people think it to be. Just the vast majority of it is.
- soVeryTired 9y ago
  Ask a million people to toss coins repeatedly and it's likely you'll find someone who gets twenty heads in a row. There's a lot of survivor bias in the industry. All the old players have made a lot of money at some point. If they hadn't, they wouldn't be old players.
  - Retric 9y ago
    It's a little worse than that as there are vast incentives to be that guy with 20 heads so people will record themselves fillping coins over and over then only talk about their best streak. Thus you end up with most companies having an 'above average' streak in a given year even if the average investment does poorly. https://m.youtube.com/watch?v=rwvIGNXY21Y https://m.youtube.com/watch?v=rwvIGNXY21Y
  - dsacco 9y ago
    There is survivorship bias, but the coin flipping analogy is a tired trope (and it implies something utterly different). There aren't a million traders, and there are more than 20 consistently beating the market. Significantly more. Do the actual math with some attempt at empirical numbers and your argument might make sense. Until people start doing that, repeating this line about coin flips and the law of large numbers doesn't add anything to the discussion. First of all, you haven't qualified who you're including in the set of "traders" and who you're including in the set of "winners." Is everyone who signs up for ETrade included? That's like major league baseball players being judged the same as way as high school baseball players. More importantly, have you done the cursory research to account for funds that consistently beat the market? How do you account for the firms that beat the market over periods that span decades? Just ridiculously lucky? What counts as a coin flip? A single trade? A trading day? Are the coins summed per trader or per fund? How are we quantifying this assessment? It's like every time someone brings up the coin flipping analogy they use these outrageous numbers without any attempt at citing a grounded source in reality. As I say every single time in threads like this: yes, it's incredibly difficult to purposefully and consistently beat the market, but that's worlds away from impossible. There is information asymmetry in the market, relatively few people/firms are capable of identifying alpha based on that, and fewer still are capable of capitalizing on it. But they exist! Stubbornly repeating the coin analogy is like insisting on proof that basketball players have inherent skill instead of luck, because most people can't make it to the NBA. We have clear examples of firms beating the market consistently for decades at a time, net of fees. I am personally familiar with people whose strategies profitably trade on small pockets of predictable events in timeseries tick data. Their strategies are smaller (~high 6 - low 7 digit accounts using personal capital), but they consistently earn 27-30% each year by trading strategies that are too capacity-constrained for larger firms (and usually they do this after being in the industry for some time). I make this point not to pick on you (it's not personal!), it's just that I see this repeated in every thread related to trading on HN. Referring to trading as coin flipping when your familiarity mostly stems from news reports flies in the face of people who are capable of developing profitable trading algorithms and who have seen it. It's as if someone told you that it's impossible to develop well-engineered software. It's exhausting. There's this weird leap from (correctly) concluding that most people in the industry can't beat the market, to damning the entire concept. If you want to say there is a lot of survivorship bias in the industry, sure, I'll agree with that. But what's the point of using Fama's coin flipping analogy if there's no rigor behind it? It precludes so much nuance in fund performance. Many funds can't beat the market at all. Many do beat the market, but they purposely decide to eat away all those gains with fees when they could run a far leaner ship. And the elite do consistently beat the market, until they eventually get large enough to diversify into multiple funds (accepting that most will be mediocre) or they return investor money because they don't need it and their strategies are capacity constrained.
    - adrianN 9y ago
      > it's impossible to develop well-engineered software That doesn't sound so stupid.
      - HeyLaughingBoy 9y ago
        It does to people who've done it consistently.
    - gmarx 9y ago
      The coin flip being tired or a trope is irrelevant. The million and 20 may not even be correct (haven't checked). the point is that people see patterns even where they don't exist. That's why science has methods for telling whether a pattern really represents something or if it would likely be seen even if the data were random. Until you do those stats on hedgefund returns your irritation at the trope remains unconvincing.
      - dsacco 9y ago
        I suppose we're at an impasse then, because the claim wasn't mine; nor is it even sufficiently formalized as to be falsifiable (which really was my point here). We cannot apply scientific methods to claims that are only semantically meaningful. For example, the definition of "coin flip" was never even specified, which is why the constant use of the analogy is absurd. When firms like RenTec exist and continue to empirically generate market-beating returns over 20-30 year timespans, the burden ceases to be on the critic of a claim to empirically disprove it, especially if it's not even falsifiable. Here, you are doing the same thing as the previous commenter, except you're not using the analogy. You cannot open your argument with the premise that returns are purely stochastic if that's not self-evident - you need to prove that. But I have never seen a single individual attempt to quantify the analogy, not even in a forced way to make it support their thesis. It's taken for granted that superlative returns are purely chance, and the goalposts are constantly moved whenever someone brings up successful funds.
        gmarx 9y ago
  - deleted 9y ago
    [deleted]
  - imcoconut 9y ago
    But if the person who called all 20 flips properly is a math PHD who discovered the Chern–Simons secondary characteristic classes of 3-manifolds which has had a profound effect on modern physics[0] - I might think they've figured out some deep shit about coin tossing. [0]https://en.wikipedia.org/wiki/James_Harris_Simons#Academic_and_scientific_career https://en.wikipedia.org/wiki/James_Harris_Simons#Academic_a...
    - soVeryTired 9y ago
      I know who Jim Simons is. But that sounds like an argument from authority to me.
      - imcoconut 9y ago
        I was citing in case anyone reading was unaware of his mathematical chops. That's a fair point. I'm not one for argument by authority. My point with his discovery is that he's empirically demonstrated a capability of uncovering understanding and deep mathematical relationships, which have practical implications. The PHD part is less relevant. In my opinion, this information decreases the probability that rentech has been consistently outperforming on the basis of pure luck. By how much, though, I can't say.
- deleted 9y ago
  [deleted]

downandout 9y ago

Nevertheless, it is a fund that has beaten the markets consistently. I was just saying that it is possible to do, so the entire industry is not the sham that most people think it to be. Just the vast majority of it is.

soVeryTired 9y ago
Ask a million people to toss coins repeatedly and it's likely you'll find someone who gets twenty heads in a row. There's a lot of survivor bias in the industry. All the old players have made a lot of money at some point. If they hadn't, they wouldn't be old players.
- Retric 9y ago
  It's a little worse than that as there are vast incentives to be that guy with 20 heads so people will record themselves fillping coins over and over then only talk about their best streak. Thus you end up with most companies having an 'above average' streak in a given year even if the average investment does poorly. https://m.youtube.com/watch?v=rwvIGNXY21Y https://m.youtube.com/watch?v=rwvIGNXY21Y
- dsacco 9y ago
  There is survivorship bias, but the coin flipping analogy is a tired trope (and it implies something utterly different). There aren't a million traders, and there are more than 20 consistently beating the market. Significantly more. Do the actual math with some attempt at empirical numbers and your argument might make sense. Until people start doing that, repeating this line about coin flips and the law of large numbers doesn't add anything to the discussion. First of all, you haven't qualified who you're including in the set of "traders" and who you're including in the set of "winners." Is everyone who signs up for ETrade included? That's like major league baseball players being judged the same as way as high school baseball players. More importantly, have you done the cursory research to account for funds that consistently beat the market? How do you account for the firms that beat the market over periods that span decades? Just ridiculously lucky? What counts as a coin flip? A single trade? A trading day? Are the coins summed per trader or per fund? How are we quantifying this assessment? It's like every time someone brings up the coin flipping analogy they use these outrageous numbers without any attempt at citing a grounded source in reality. As I say every single time in threads like this: yes, it's incredibly difficult to purposefully and consistently beat the market, but that's worlds away from impossible. There is information asymmetry in the market, relatively few people/firms are capable of identifying alpha based on that, and fewer still are capable of capitalizing on it. But they exist! Stubbornly repeating the coin analogy is like insisting on proof that basketball players have inherent skill instead of luck, because most people can't make it to the NBA. We have clear examples of firms beating the market consistently for decades at a time, net of fees. I am personally familiar with people whose strategies profitably trade on small pockets of predictable events in timeseries tick data. Their strategies are smaller (~high 6 - low 7 digit accounts using personal capital), but they consistently earn 27-30% each year by trading strategies that are too capacity-constrained for larger firms (and usually they do this after being in the industry for some time). I make this point not to pick on you (it's not personal!), it's just that I see this repeated in every thread related to trading on HN. Referring to trading as coin flipping when your familiarity mostly stems from news reports flies in the face of people who are capable of developing profitable trading algorithms and who have seen it. It's as if someone told you that it's impossible to develop well-engineered software. It's exhausting. There's this weird leap from (correctly) concluding that most people in the industry can't beat the market, to damning the entire concept. If you want to say there is a lot of survivorship bias in the industry, sure, I'll agree with that. But what's the point of using Fama's coin flipping analogy if there's no rigor behind it? It precludes so much nuance in fund performance. Many funds can't beat the market at all. Many do beat the market, but they purposely decide to eat away all those gains with fees when they could run a far leaner ship. And the elite do consistently beat the market, until they eventually get large enough to diversify into multiple funds (accepting that most will be mediocre) or they return investor money because they don't need it and their strategies are capacity constrained.
  - adrianN 9y ago
    > it's impossible to develop well-engineered software That doesn't sound so stupid.
    - HeyLaughingBoy 9y ago
      It does to people who've done it consistently.
  - gmarx 9y ago
    The coin flip being tired or a trope is irrelevant. The million and 20 may not even be correct (haven't checked). the point is that people see patterns even where they don't exist. That's why science has methods for telling whether a pattern really represents something or if it would likely be seen even if the data were random. Until you do those stats on hedgefund returns your irritation at the trope remains unconvincing.
    - dsacco 9y ago
      I suppose we're at an impasse then, because the claim wasn't mine; nor is it even sufficiently formalized as to be falsifiable (which really was my point here). We cannot apply scientific methods to claims that are only semantically meaningful. For example, the definition of "coin flip" was never even specified, which is why the constant use of the analogy is absurd. When firms like RenTec exist and continue to empirically generate market-beating returns over 20-30 year timespans, the burden ceases to be on the critic of a claim to empirically disprove it, especially if it's not even falsifiable. Here, you are doing the same thing as the previous commenter, except you're not using the analogy. You cannot open your argument with the premise that returns are purely stochastic if that's not self-evident - you need to prove that. But I have never seen a single individual attempt to quantify the analogy, not even in a forced way to make it support their thesis. It's taken for granted that superlative returns are purely chance, and the goalposts are constantly moved whenever someone brings up successful funds.
      - gmarx 9y ago
- deleted 9y ago
  [deleted]
- imcoconut 9y ago
  But if the person who called all 20 flips properly is a math PHD who discovered the Chern–Simons secondary characteristic classes of 3-manifolds which has had a profound effect on modern physics[0] - I might think they've figured out some deep shit about coin tossing. [0]https://en.wikipedia.org/wiki/James_Harris_Simons#Academic_and_scientific_career https://en.wikipedia.org/wiki/James_Harris_Simons#Academic_a...
  - soVeryTired 9y ago
    I know who Jim Simons is. But that sounds like an argument from authority to me.
    - imcoconut 9y ago
      I was citing in case anyone reading was unaware of his mathematical chops. That's a fair point. I'm not one for argument by authority. My point with his discovery is that he's empirically demonstrated a capability of uncovering understanding and deep mathematical relationships, which have practical implications. The PHD part is less relevant. In my opinion, this information decreases the probability that rentech has been consistently outperforming on the basis of pure luck. By how much, though, I can't say.
deleted 9y ago
[deleted]