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> It's almost impossible to beat the market after fees. Anyone who promises to do so, consistently, is full of it. French (2008) and a whole body of literature
by baobabKoodaa 4y ago
> It's almost impossible to beat the market after fees. Anyone who promises to do so, consistently, is full of it. French (2008) and a whole body of literature before and after.
Not this dead horse again. Yes, academics have written a lot of papers claiming things that turned out to be false. See Renaissance Medallion Fund and Berkshire Hathaway for references.
- mcguire 4y agoI'm not sure Berkshire Hathaway is comparable to anything in the crypto sphere.
- baobabKoodaa 4y agoParent was referring to French (2008). Bitcoin was created in 2009, so the whole crypto sphere didn't exist in 2008. The reference was in relation to stock markets (and also to some extent derivative markets and bond markets etc.). Berkshire Hathaway is a good example of how stock markets are not efficient.
- lottin 4y agoWhat exactly turned out to be false?
- baobabKoodaa 4y agoEfficient markets hypothesis in the context of stock and derivatives markets.
- lottin 4y agoHas it been disproven? As far as I know the best performing model of stock returns is the Fama-French 5-factor model which assumes efficient markets.
- baobabKoodaa 4y agoYou can look at the consistently outsized returns of Renaissance's Medallion fund and Buffet's Berkshire Hathaway. Those returns aren't explainable with "1000 monkeys and a typewriter". (Or, they are if you add a sigma every few years.)
- lottin 4y agoThere are anomalies that we don't know how to fully explain yet, the question is: is the efficient market hypothesis more consistent with what we observe than the alternative hypothesis? And the answer is yes.
- baobabKoodaa 4y agoYou have a theory that says "black sheep don't exist". I show you 2 black sheep. Your counter is that "There are anomalies that we don't know how to fully explain yet" and that you'll keep holding onto your belief that black sheep don't exist. Because it's "more consistent with what we observe", despite the fact that you just observed 2 black sheep, you know, existing.
- lottin 4y agoThe theory doesn't say beating the market is impossible. It says is should be relatively rare.
- baobabKoodaa 4y agoWikipedia top-line sentence disagrees with you regarding what the theory says: > 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. But anyway, it sounds like we agree on the main point: relatively few individuals are able to consistently beat the market.