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But the parent's comment was "you cannot beat the market on average (since the index funds are the average)". If you take a particular index fund to define an a

• throwawaymath 8y ago
  Yes, the point you're referencing is wrong. Your last point is correct. We can't extrapolate the fact that indices are designed to return averages of some market to the claim that indices can't be beaten without assuming the EMH first.
• kgwgk 8y ago
  > alpha generation is a zero-sum game This is a mathematical fact. Let’s say you do better than the market because you deviate from the market weights. For each position that you have, relative to the market, there is someone somewhere that holds the complementary position. Because the agregate of all the positions is the market portfolio, by definition.
• lmm 8y ago
  > GP might be trying to argue that alpha generation is a zero-sum game, but alpha and beta are notoriously slippery concepts. If you want to define beta as the index return, I think you're going to have a hard time convincing me that alpha is zero sum without assuming the EMH or something similar. Alpha is zero sum because the total return of the market is the total return of the market. So the money-weighted average return to stockholders must equal the money-weighted average growth of stocks.