4 ms·
Also the selection effect of us just being aware of it.
by Moshe_Silnorin 9y ago
Also the selection effect of us just being aware of it.
- Bartweiss 9y agoIt seems like you could probably insure some great press coverage by starting several funds with wild-ass prediction mechanisms that don't change much. As long as you pick enough investments to roughly mirror the market, you can spin all the winners as incredible breakthrough techniques.
- dsacco 9y agoIf the winning techniques continue to generate greater risk-adjusted returns than the market for a significant amount of time, you haven't really bypassed the whole, "finding alpha" bit. Unless of course you've spun up a truly absurd number of funds, but I'd find that harder to believe than just beating the market in the first place given the capital requirements. "Fuzzing" for alpha that way would be really inefficient.
- Karissa44 9y agolike Curtis said I can't believe that any body can make $8668 in one month on the internet . > Open this >>>>>>>>>>>http://ow.ly/iBXm30dNtIZ http://ow.ly/iBXm30dNtIZ
- Bartweiss 9y agoI think I was a little unclear. I'm not actually proposing fuzzing alpha, just capitalizing on survivor bias. Basically my idea was that if you're going to spin up a 'normal' managed fund, you'll average tracking the market, with some chance of success or failure beyond that. If that's all you're doing, you might as well go all-out on claiming to have secret sauce that produces your alpha. I'm not expecting you'll get any, just that you might as well have a media-friendly way of picking if you don't have an actually useful one.
- jedberg 9y agoHeh, it's like that scam where you email people your predictions for who will win each football game for a particular team, where different groups get different winners. Each week some of the emails are right and some are wrong. After six weeks, 1.5% of your original folks will have seen six correct predictions, at which point you ask them for $1000 to see the 7th prediction which they are likely to pay for since "you're so accurate!".
- Bartweiss 9y agoHah, that's excellent! I'd never heard of that specific trick, but survivor bias does seem like one of the best ways to fool scam-aware people into trusting you.
- ryandrake 9y agoI had a b-school class do a similar exercise, in the context of the debate between passively and actively managed funds. Everyone in the class was asked to stand up, pull out a coin and flip it. If you flipped tails you sat down. Then the remaining students flipped again, repeating until there was only one person left standing. At which point the professor "interviewed" the student, asking what her method was and how she became such a skilled heads-flipper. Lots of parallels in the real world where luck is a dominating factor (stock picking, choosing a "rocket ship" company to join or invest in, general business success), yet our tendency is to seek out a cause or reason.