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>That means stock pickers can't do better than average, but they also can't do worse than average. Not True. In fact virtually all stock pickers will do better
by vanattab 4y ago
>That means stock pickers can't do better than average, but they also can't do worse than average.
Not True. In fact virtually all stock pickers will do better or worse then the average. What you mean to say is the "average" stockpicker can't do better or worse then the average but that is of course a tautology.
- elil17 4y agoWhat I actually mean is that 99.999% stock pickers can't intentionally do better or worse than average. And the tiny fraction who can are fund directors who are flooded with so much capital that they generate sub-1% alphas (which they eat up with their own fees).
- Ekaros 4y agoWouldn't it be possible to do worse? I think there should be enough opportunities to pick up true losers or almost dying companies. I'm not saying you could extract profit for those situation as there are too many other people trying to do it. But losing money should certainly be possible.
- elil17 4y agoA few factors here: 1. You could try to do worse than average, and you'd succeed, but only because of the skewness of individual stock performance. You'd be no better than random chance at picking losers, it'd just be that most stocks are losers. 2. Factor-correction means the strategy of "choosing dying companies" won't work (e.g. in the Fama and French five factor model a dying company would an outlier in terms of high-minus-low, robust-minus-weak, and probably conservative-minus-aggressive).