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The point is that you can not beat the market with your interpretation of the available information. This is not a question of the correctness of any given int

by YZF 6y ago

The point is that you can not beat the market with your interpretation of the available information. This is not a question of the correctness of any given interpretation. Correctness can never be determined, there is no "correct" or "incorrect" interpretation of the available information. EDIT: So one thing to consider is that markets are predictive. A "correct" interpretation is only correct if it can predict what will happen in the future. And because the future is not predictable (proof needed but whatever) there is no way to know which interpretation is "correct".

philosopher1234 6y ago
But this is also obviously false. Markets are subject to human phenomena, like mob mentality, which is the theme of the examples I listed. The same way fantastic tennis players can consistently outperform the rest of the competition, fantastic traders can certainly outperform others. Of course, in an ultra competitive environment, with a massive number of constant competitors, its very hard to retain a number one spot. Its also hard to predict markets because of the very fact that they're inefficient and irrational. There are so many active participants its hard to predict how they will react to available information. Take 2008 for instance. There was public information demonstrating fatal weakness in the housing market, but it was neglected en masse. This makes it very hard to beat the market. Even if you're correct, the market could decide to ignore the facts, and you wouldn't be able to reap any alpha from your observation.
- imtringued 6y ago
  You don't seem to understand the problem. If there is a way to consistently "beat" the market then everyone will adopt the strategy and you're no longer ahead. The only way you can beat the market is by having exclusive access to information or opportunities (dumb luck) and by definition the vast majority of people do not have these, otherwise they wouldn't be exclusive.
  - ashtonkem 6y ago
    But that’s obviously not true, at least not all of the time. In 2008 there was plenty of information indicating that the market was not healthy, and a number of market actors spotted this early on and won big betting against what the market was doing. They neither had insider information nor was it luck; the market in 2008 was catastrophically wrong about what the price of mortgage backed CDOs should be.
  - thebean11 6y ago
    > If there is a way to consistently "beat" the market then everyone will adopt the strategy and you're no longer ahead. Sure, assuming every market participant has knowledge of the winning strategy, and the skills to employ it..which is a pretty big caveat. By this logic why do some chess players beat others? Wouldn't they all simply adopt the same strategy?

by YZF 6y ago

philosopher1234 6y ago

But this is also obviously false. Markets are subject to human phenomena, like mob mentality, which is the theme of the examples I listed. The same way fantastic tennis players can consistently outperform the rest of the competition, fantastic traders can certainly outperform others. Of course, in an ultra competitive environment, with a massive number of constant competitors, its very hard to retain a number one spot. Its also hard to predict markets because of the very fact that they're inefficient and irrational. There are so many active participants its hard to predict how they will react to available information. Take 2008 for instance. There was public information demonstrating fatal weakness in the housing market, but it was neglected en masse. This makes it very hard to beat the market. Even if you're correct, the market could decide to ignore the facts, and you wouldn't be able to reap any alpha from your observation.

imtringued 6y ago
You don't seem to understand the problem. If there is a way to consistently "beat" the market then everyone will adopt the strategy and you're no longer ahead. The only way you can beat the market is by having exclusive access to information or opportunities (dumb luck) and by definition the vast majority of people do not have these, otherwise they wouldn't be exclusive.
- ashtonkem 6y ago
  But that’s obviously not true, at least not all of the time. In 2008 there was plenty of information indicating that the market was not healthy, and a number of market actors spotted this early on and won big betting against what the market was doing. They neither had insider information nor was it luck; the market in 2008 was catastrophically wrong about what the price of mortgage backed CDOs should be.
- thebean11 6y ago
  > If there is a way to consistently "beat" the market then everyone will adopt the strategy and you're no longer ahead. Sure, assuming every market participant has knowledge of the winning strategy, and the skills to employ it..which is a pretty big caveat. By this logic why do some chess players beat others? Wouldn't they all simply adopt the same strategy?