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It has to do with amount of capital, time horizon on the investment, how early you are, and all manner of things. It’s much easier for the individual investor t

It has to do with amount of capital, time horizon on the investment, how early you are, and all manner of things. It’s much easier for the individual investor to deploy capital than a hedge fund that has huge bags and therefore needs to make huge trades. There are benefits to being small as well as negatives to being huge. Writing off any ability to beat the market is defeatist because it happens all the time. Someone has to buy the mis-priced stock and it isn’t high frequency firms who exit positions every night.

xyzelement 4y ago
I agree that someone has to buy the mispriced stock. I disagree (because of evidence to the contrary) that someone can consistently identify the genuine mispricings in a way that pays off on risk adjusted basis.
- greenyouse 4y ago
  There are some market inefficiencies that have been documented but they seem rare. The post earnings announcement drift (PEAD)[0] is a thing that exists but shouldn't if markets were totally efficient. That gets used for gains pretty consistently but not 100% of the time. Euan Sinclair had a book where he mentioned a return of 9-27% when traded on annually.[1] Some of the big players have moves like that which work well given the right market conditions. My guess is that they have many, many patterns like that to trade on or models which are right more often than not. I don't know anything though since I'm a 101 retail investor... Positional options trading and volatility stuff makes my brain hurt :( Have you seen strategies like that before? It's really interesting to dig into but seems to require a lot of knowledge to know how to trade on. [0] https://en.wikipedia.org/wiki/Post%E2%80%93earnings-announcement_drift https://en.wikipedia.org/wiki/Post%E2%80%93earnings-announce... [1] Positional Options Trading: An Advanced Guide, pg. 90

xyzelement 4y ago

I agree that someone has to buy the mispriced stock. I disagree (because of evidence to the contrary) that someone can consistently identify the genuine mispricings in a way that pays off on risk adjusted basis.

greenyouse 4y ago
There are some market inefficiencies that have been documented but they seem rare. The post earnings announcement drift (PEAD)[0] is a thing that exists but shouldn't if markets were totally efficient. That gets used for gains pretty consistently but not 100% of the time. Euan Sinclair had a book where he mentioned a return of 9-27% when traded on annually.[1] Some of the big players have moves like that which work well given the right market conditions. My guess is that they have many, many patterns like that to trade on or models which are right more often than not. I don't know anything though since I'm a 101 retail investor... Positional options trading and volatility stuff makes my brain hurt :( Have you seen strategies like that before? It's really interesting to dig into but seems to require a lot of knowledge to know how to trade on. [0] https://en.wikipedia.org/wiki/Post%E2%80%93earnings-announcement_drift https://en.wikipedia.org/wiki/Post%E2%80%93earnings-announce... [1] Positional Options Trading: An Advanced Guide, pg. 90