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> there is much academic research supporting the use of cross-sectional and time series momentum Yes. It gets you published. and... No. It is nonsense. I

by worik 4y ago

> there is much academic research supporting the use of cross-sectional and time series momentum Yes. It gets you published. and... No. It is nonsense. I have researched TA. My conclusion is that the efficient market hypothesis, in its weak form, is true. There are a lot of cognitive biases at work and a lot of wishful thinking. All information has a cost, that cost is factored into pricing, but it is cheaper for some than for others. That explains some of the effects you see. Another is trading costs. Transaction costs for most actors in the market are as high as they have ever been (it is a deliberate policy of financial firms, and many costs are hidden, but those gleaming skyscrapers on Wall St? Transaction costs). When yuo see a simulation of TA my advice is to calculate the minimum transaction cost for profit, and then compare that to what is actually available (Transaction costs often reach 200 basis points, and the cheapest I found were in German markets in the nineteenth century. A damning indictment on modern finance)

integrate-this 4y ago
The efficient markets hypothesis does not, and has not, stood up to empirical research since it was first invented. The reason that it's a hypothesis, and not a theory, is that it's impossible to disprove because all of evidence that disagrees with it is dismissed as spurious.
- worik 4y ago
  > he efficient markets hypothesis does not, and has not, stood up to empirical research since it was first invented Yes it has. In its weak form. More pointedly all the supposed counter examples turn out to be snake oil. People really want to believe there is some magic that can predict the future.... > the reason that it's a hypothesis, and not a theory, is that it's impossible to disprove It is an hypothesis. It is impossible to prove it, only disprove it. And.... > because all of evidence that disagrees with it is dismissed as spurious. All the counter examples turn out to be snake oil. I spend years looking, repeating simulations, back testing algorithms.... Snake oil each and every time People really want to believe....
  - jeffreyrogers 4y ago
    Momentum, value, and size are all predictive of future excess returns. If the weak form were true this would not be the case. And those are just dead simple buy-and-hold strategies that anyone can implement.
jeffreyrogers 4y ago
Transaction costs have come down a lot in the past 20 years. 10-20 basis points is probably reasonable for a retail trader with a good broker. Double that for a round trip trade.

by worik 4y ago

integrate-this 4y ago

The efficient markets hypothesis does not, and has not, stood up to empirical research since it was first invented. The reason that it's a hypothesis, and not a theory, is that it's impossible to disprove because all of evidence that disagrees with it is dismissed as spurious.

worik 4y ago
> he efficient markets hypothesis does not, and has not, stood up to empirical research since it was first invented Yes it has. In its weak form. More pointedly all the supposed counter examples turn out to be snake oil. People really want to believe there is some magic that can predict the future.... > the reason that it's a hypothesis, and not a theory, is that it's impossible to disprove It is an hypothesis. It is impossible to prove it, only disprove it. And.... > because all of evidence that disagrees with it is dismissed as spurious. All the counter examples turn out to be snake oil. I spend years looking, repeating simulations, back testing algorithms.... Snake oil each and every time People really want to believe....
- jeffreyrogers 4y ago
  Momentum, value, and size are all predictive of future excess returns. If the weak form were true this would not be the case. And those are just dead simple buy-and-hold strategies that anyone can implement.

jeffreyrogers 4y ago

Transaction costs have come down a lot in the past 20 years. 10-20 basis points is probably reasonable for a retail trader with a good broker. Double that for a round trip trade.