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Trading costs are a thing. In an efficient market I would expect ex-ante negative performance versus the benchmark.
by trader1 6y ago
Trading costs are a thing. In an efficient market I would expect ex-ante negative performance versus the benchmark.
- greatwave1 6y agoTrue, although the method I used to find the aggregate performance of Robinhood users ignored trading costs. Obviously this data is incredibly noisy and nowhere near statistically significant, but I like how it implies that betting against Robinhood traders would've been an alpha-generating strategy over the last two years.
- trader1 6y agoI agree that the data is quite noisy, and the choice of weighting (by users instead of dollar value traded) may significantly influence results. Then again, after reading r/wallstreetbets, I am not so sure ;).
- greatwave1 6y agoYeah, unfortunately Robinhood doesn't provide data on # shares held per user. I've been doing something similar to track discussion on r/WSB here: https://www.quiverquant.com/wallstreetbets/ https://www.quiverquant.com/wallstreetbets/ I haven't finished any backtesting yet to see if they live up to their reputation haha.
- throw0101a 6y agoWilliam F. Sharpe mentions this explicitly in "The Arithmetic of Active Management" (The Financial Analysts' Journal. January 1991, Vol. 47, Issue 1, Pages 7-9). He was a co-creator of CAPM (won Nobel) and did the Sharpe ratio: * https://en.wikipedia.org/wiki/William_F._Sharpe https://en.wikipedia.org/wiki/William_F._Sharpe