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It sounds like the biggest problem with this study (and with many markets) was that there was no way to efficiently sell short. If it's only possible to make m
by ianferrel 16y ago
It sounds like the biggest problem with this study (and with many markets) was that there was no way to efficiently sell short.
If it's only possible to make money when asset prices go up, some rational individuals will buy in even when they think the price is already too high, because until they own the asset, they can't profit from it.
- ced 16y agoThere's a quote that goes "Your capacity to short a market is dwarfed by the market's ability to defy gravity". The housing bubble began in 2002. If you had shorted it as soon as it was 10% "too high", you would have had to wait 6 years before cashing in. The yield/year is miserable, and meanwhile, your total net worth would have been negative around 2006. (More likely, the bank would have forced you to "cash out", at great loss)