4 ms·

How does the author explain the Renaissance Medallion Fund? Also (and I asked this in the last big HN discussion of EMH too), how can EMH co-exist with the exi

How does the author explain the Renaissance Medallion Fund? Also (and I asked this in the last big HN discussion of EMH too), how can EMH co-exist with the existence of 'trading' as a profession? I don't mean day traders, I mean professional traders who work for Goldman Sachs, investments banks, etc. Every asset class in the world has dedicated, professional traders. If trading is fundamentally unprofitable over a long enough period of time.... why do sophisticated banks employ traders? (Wouldn't they, uh, have figured this out already?) Assuming trading is profitable (for professionals with a massive data advantage, etc.)- doesn't that disprove EMH? I can believe retail trading is always unprofitable, but why do the pros do it?

tanvach 6y ago
Hedge funds overall do not outperform index funds in the long run [1]. Banks have moved mostly to sell side and their traders earn commission and bid-ask spread. For a while the most profitable shops are market makers who use high-speed trading to leverage tiny arbitage opportunities, profiting exactly from tiny fluctuations from an efficient market. [1] http://ftalphaville.ft.com/2018/04/24/1524542401000/A-complex-analysis-reaches-same-conclusion-as-simple-one--hedge-funds-suck/z http://ftalphaville.ft.com/2018/04/24/1524542401000/A-comple...
- hash872 6y ago
  >Hedge funds overall do not outperform index funds in the long run But the Medallion Fund does apparently, which is my point. How can they have 70+% returns year after year for decades in a world where EMH is true? Their existence seems to disprove it, no?