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inb4: Someone launches an ETF called “Diamond Hands” (ticker HODL) full of crazy high-beta stuff. People confuse it with the actual diamonds and hilarity ensue

inb4: Someone launches an ETF called “Diamond Hands” (ticker HODL) full of crazy high-beta stuff. People confuse it with the actual diamonds and hilarity ensues. Stuff like the latter actually happens. Efficient markets my, err, skepticism.

LatteLazy 4y ago
Isn't the market taking money away from people who confuse "Diamond Hands" fund for Diamonds exactly the sort of efficiency markets are meant to promote: people who do dumb things are punished, those who do useful ones are rewarded.
- benreesman 4y ago
  I think plenty people quietly sold e.g. Tesla at whatever nutcase valuation before it pulled back. Lots of people get in and out of some crazy asset bubble at the right time and then go on to lose money at everything else while spewing advice the whole time: just ask Peter Thiel or Mark Cuban.
qeternity 4y ago
Go have a look at the Tulip Trend Fund
nabla9 4y ago
(1) consistently (2) on a risk-adjusted basis The efficient-market hypothesis (EMH) says that it is impossible to "beat the market" *consistently on a risk-adjusted basis*. According to the efficient-market hypothesis it's possible to beat market. HODL or ARKK are not evidence against EMH. BRK is probably the closest evidence that EMH is not as strong as assumed.
- benreesman 4y ago
  I’m aware of the Chicago/Fama school of thought, its history, and the difference between strong-form and weak-form efficiency, thanks. And before something like Berkshire even becomes interesting to any version of the EMH, you have to show that Medallion is a fraud. Which, who knows it’s pretty fucking opaque, but they haven’t taken outside money in a long time and keep putting up 30-40% annualized almost every year.
  - nabla9 4y ago
    >I’m aware of the Chicago/Fama school of thought, its history, and the difference between strong-form and weak-form efficiency, thanks. Then you must agree that your comment linking ARKK and HOLDL to efficient markets was misplaced.
    - benreesman 4y ago
      Given the verbatim quote from the first paragraph of the wikipedia page, I'll assume you've read it: "The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information." You'll note that "consistent", "risk-adjusted", and "beat the market" are all in quotes, because they are not well-defined technical terms, at least thusly contextualized. What Wikipedia's over-simplification in the first paragraph says is that all available information is incorporated into asset prices. Now even that's more than a little nuanced than one might conclude, because not only is there considerable controversy about how quickly and by what mechanisms this incorporation into prices takes place even in you buy into this malarky, but Eugene Fama himself would sound like Greenspan in front of Congress trying to explain how a defunct Chinese wireless company goes up 47,000% in year on the back of a different company having it's IPO [1]. But I'm really going to hang this on your use of the word "misplaced", and no, I don't think a playful comment with actual information in it ([1] again) is misplaced in a thread full of playful comments about Silicon Valley the TV show. I think grab-the-first-paragraph-from-wikipedia-and-be-a-killjoy-pedant is misplaced. [1] https://www.cnbc.com/2019/04/18/investors-appear-to-trade-wrong-zoom-company-shares-before-ipo.html https://www.cnbc.com/2019/04/18/investors-appear-to-trade-wr...

LatteLazy 4y ago

Isn't the market taking money away from people who confuse "Diamond Hands" fund for Diamonds exactly the sort of efficiency markets are meant to promote: people who do dumb things are punished, those who do useful ones are rewarded.

benreesman 4y ago
I think plenty people quietly sold e.g. Tesla at whatever nutcase valuation before it pulled back. Lots of people get in and out of some crazy asset bubble at the right time and then go on to lose money at everything else while spewing advice the whole time: just ask Peter Thiel or Mark Cuban.

qeternity 4y ago

Go have a look at the Tulip Trend Fund

nabla9 4y ago

(1) consistently (2) on a risk-adjusted basis The efficient-market hypothesis (EMH) says that it is impossible to "beat the market" *consistently on a risk-adjusted basis*. According to the efficient-market hypothesis it's possible to beat market. HODL or ARKK are not evidence against EMH. BRK is probably the closest evidence that EMH is not as strong as assumed.

benreesman 4y ago
I’m aware of the Chicago/Fama school of thought, its history, and the difference between strong-form and weak-form efficiency, thanks. And before something like Berkshire even becomes interesting to any version of the EMH, you have to show that Medallion is a fraud. Which, who knows it’s pretty fucking opaque, but they haven’t taken outside money in a long time and keep putting up 30-40% annualized almost every year.
- nabla9 4y ago
  >I’m aware of the Chicago/Fama school of thought, its history, and the difference between strong-form and weak-form efficiency, thanks. Then you must agree that your comment linking ARKK and HOLDL to efficient markets was misplaced.
  - benreesman 4y ago
    Given the verbatim quote from the first paragraph of the wikipedia page, I'll assume you've read it: "The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information." You'll note that "consistent", "risk-adjusted", and "beat the market" are all in quotes, because they are not well-defined technical terms, at least thusly contextualized. What Wikipedia's over-simplification in the first paragraph says is that all available information is incorporated into asset prices. Now even that's more than a little nuanced than one might conclude, because not only is there considerable controversy about how quickly and by what mechanisms this incorporation into prices takes place even in you buy into this malarky, but Eugene Fama himself would sound like Greenspan in front of Congress trying to explain how a defunct Chinese wireless company goes up 47,000% in year on the back of a different company having it's IPO [1]. But I'm really going to hang this on your use of the word "misplaced", and no, I don't think a playful comment with actual information in it ([1] again) is misplaced in a thread full of playful comments about Silicon Valley the TV show. I think grab-the-first-paragraph-from-wikipedia-and-be-a-killjoy-pedant is misplaced. [1] https://www.cnbc.com/2019/04/18/investors-appear-to-trade-wrong-zoom-company-shares-before-ipo.html https://www.cnbc.com/2019/04/18/investors-appear-to-trade-wr...