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To go into further detail about systemic investing: There have been experiments like the turtle traders ^ 1 who applied "trend following", used today by many C

by veqq 3y ago

To go into further detail about systemic investing: There have been experiments like the turtle traders ^ 1 who applied "trend following", used today by many CTAs on exotic markets. For this, an investor taught some people his strategy/rules, gave them his money and they've shined for 40 years. The fundamental strategy still works today (updated). Fundamentally, it's a method to ride momentum in different ways (e.g. crossectional.) Hedge fund managers like Rzepczynski, Cem Karsan, Alan Beer... Richard Brennan is the most insightful of them who shares his methods freely. N.b. trend following doesn't work well in stock markets, but flourishes in Mexican rate swaps, orange juice futures, London sugar... combined in ensembles. Traditional value investors, building on the Intelligent Investor, have always done well over samples above a few years. (N.b. Warren Buffet hasn't been a value investor for a long time, because he has too much to manage. He was strongly inspired by Fisher's Common Stocks and Uncommon Profits, which gave us the concept of "growth stocks".) (N.b. 2, value investing ETFs are mostly terrible, fundamentally not investing in value stocks due to their structures.) Carisle's Acquierer's Multiple is the most recent development in systemic value investing (he also runs an ETF or two along these lines). "Magic formula investing" even holds up too! In the mining space, you also get discretionary (not purely systematic) investors like Rick Rule openly discussing their methodologies, successful for decades and decades. Here’s an interesting paper ^ 2 (exec summary pages 5-6). Note that 70% of underperformance is due to investors withdrawing funds during times of market crisis. Fund fees also drive the majority of underperformance. N.b. most wealth managers can't legally follow such strategies because of the prudent person rule. They are legally forced to underperform typical indices - and the majority of research has focused on them, distorting the data pool. [1] https://www.investopedia.com/articles/trading/08/turtle-trading.asp https://www.investopedia.com/articles/trading/08/turtle-trad... [2] https://wealthwatchadvisors.com/wp-content/uploads/2020/03/QAIB_PremiumEdition2020_WWA.pdf https://wealthwatchadvisors.com/wp-content/uploads/2020/03/Q...

lend000 3y ago
The fact that you're being downvoted for factual contributions kind of explains why it's possible to beat the markets. Most people refuse to believe it. No public strategies are going to beat the market by a huge amount, and having the discipline to execute them manually isn't easy, but it has been clearly shown to be possible.
- zer0tonin 3y ago
  The dogma that it's impossible to beat the market is frankly weird at this point. If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX.
  - Aunche 3y ago
    It doesn't count as beating the market unless if you're doing so due to skill. It's not particularly unusual to beat the market and come out of a casino positive. On the other hand, bragging about how good you are at slots, is what will get you "weird dogmatism."
    - zer0tonin 3y ago
      Dang, I guess I will go tell my quant friends their knowledge of probabilities doesn't count actually, they should try having "skill".
      - the_sleaze9 3y ago
        Exactly. That's why I only play the `Skill Games` at the back of the gas station with my savings.
  - deleted 3y ago
    [deleted]
  - throw0101c 3y ago
    > If the markets were truly efficient […] And who is arguing that they are perfectly efficient? Markets work on information, which is not (initially) evenly distributed and because of the physics can only spread at the speed of light once it is known. The latter was used to detect insider trading: * https://www.npr.org/sections/alltechconsidered/2013/09/24/225824387/the-mystery-of-600-million-traded-in-the-blink-of-an-eye https://www.npr.org/sections/alltechconsidered/2013/09/24/22... For the former, people are renting satellite time to get to information that no one else has to determine trades: * https://newsroom.haas.berkeley.edu/how-hedge-funds-use-satellite-images-to-beat-wall-street-and-main-street/ https://newsroom.haas.berkeley.edu/how-hedge-funds-use-satel... > Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX. Two of the proponents efficient markets explain why (and shared a Nobel for the work): * https://en.wikipedia.org/wiki/Fama–French_three-factor_model https://en.wikipedia.org/wiki/Fama–French_three-factor_model The two are not mutually exclusive, and there is published literature on it. Good interview with Fama (audio, video, transcript): * https://rationalreminder.ca/podcast/200 https://rationalreminder.ca/podcast/200
mettamage 3y ago
Fun! I'll save your comment (and upvoted it). Curious to see where this rabbit whole goes. On another point, I'd like to suggest you reference as follows [1]. I found that syntax to be more prevalent on HN than ^ [2]. It's easier to parse, since you know it's separate from the sentence. Whereas if I write that I have a reference like ^ 3 then it is harder to see that ^ 3 is apart from the sentence or part of it. [1] This part you did do that way, haha. [2] I haven't done a formal count, but I'm sure some regex search engine will give you many hits if you search for \[[0-9]\]. [3] That last sentence still confuses me.
throw0101c 3y ago
> Traditional value investors, building on the Intelligent Investor, have always done well over samples above a few years. From the last published interview with Benjamin Graham, author of II ("A Conversation with Benjamin Graham", Financial Analysts Journal, September-October 1976) > > In selecting the common stock portfolio, do you advise careful study of and selectivity among different issues? > In general, no. I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when our textbook "Graham and Dodd" was first published; but the situation has changed a great deal since then. In the old days any well-trained security analyst could do a good professional job of selecting undervalued issues through detailed studies; but in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost. To that very limited extent I'm on the side of the "efficient market" school of thought now generally accepted by the professors. * http://www.grahamanddoddsville.net/wordpress/Files/Gurus/Benjamin%20Graham/A%20Conversation%20with%20Ben%20Graham%20-%20Financial%20Analysts%20Journal%20-%201976.pdf http://www.grahamanddoddsville.net/wordpress/Files/Gurus/Ben...

by veqq 3y ago

lend000 3y ago

The fact that you're being downvoted for factual contributions kind of explains why it's possible to beat the markets. Most people refuse to believe it. No public strategies are going to beat the market by a huge amount, and having the discipline to execute them manually isn't easy, but it has been clearly shown to be possible.

zer0tonin 3y ago
The dogma that it's impossible to beat the market is frankly weird at this point. If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX.
- Aunche 3y ago
  It doesn't count as beating the market unless if you're doing so due to skill. It's not particularly unusual to beat the market and come out of a casino positive. On the other hand, bragging about how good you are at slots, is what will get you "weird dogmatism."
  - zer0tonin 3y ago
    Dang, I guess I will go tell my quant friends their knowledge of probabilities doesn't count actually, they should try having "skill".
    - the_sleaze9 3y ago
      Exactly. That's why I only play the `Skill Games` at the back of the gas station with my savings.
- deleted 3y ago
  [deleted]
- throw0101c 3y ago
  > If the markets were truly efficient […] And who is arguing that they are perfectly efficient? Markets work on information, which is not (initially) evenly distributed and because of the physics can only spread at the speed of light once it is known. The latter was used to detect insider trading: * https://www.npr.org/sections/alltechconsidered/2013/09/24/225824387/the-mystery-of-600-million-traded-in-the-blink-of-an-eye https://www.npr.org/sections/alltechconsidered/2013/09/24/22... For the former, people are renting satellite time to get to information that no one else has to determine trades: * https://newsroom.haas.berkeley.edu/how-hedge-funds-use-satellite-images-to-beat-wall-street-and-main-street/ https://newsroom.haas.berkeley.edu/how-hedge-funds-use-satel... > Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX. Two of the proponents efficient markets explain why (and shared a Nobel for the work): * https://en.wikipedia.org/wiki/Fama–French_three-factor_model https://en.wikipedia.org/wiki/Fama–French_three-factor_model The two are not mutually exclusive, and there is published literature on it. Good interview with Fama (audio, video, transcript): * https://rationalreminder.ca/podcast/200 https://rationalreminder.ca/podcast/200

mettamage 3y ago

Fun! I'll save your comment (and upvoted it). Curious to see where this rabbit whole goes. On another point, I'd like to suggest you reference as follows [1]. I found that syntax to be more prevalent on HN than ^ [2]. It's easier to parse, since you know it's separate from the sentence. Whereas if I write that I have a reference like ^ 3 then it is harder to see that ^ 3 is apart from the sentence or part of it. [1] This part you did do that way, haha. [2] I haven't done a formal count, but I'm sure some regex search engine will give you many hits if you search for \[[0-9]\]. [3] That last sentence still confuses me.

throw0101c 3y ago

> Traditional value investors, building on the Intelligent Investor, have always done well over samples above a few years. From the last published interview with Benjamin Graham, author of II ("A Conversation with Benjamin Graham", Financial Analysts Journal, September-October 1976) > > In selecting the common stock portfolio, do you advise careful study of and selectivity among different issues? > In general, no. I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when our textbook "Graham and Dodd" was first published; but the situation has changed a great deal since then. In the old days any well-trained security analyst could do a good professional job of selecting undervalued issues through detailed studies; but in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost. To that very limited extent I'm on the side of the "efficient market" school of thought now generally accepted by the professors. * http://www.grahamanddoddsville.net/wordpress/Files/Gurus/Benjamin%20Graham/A%20Conversation%20with%20Ben%20Graham%20-%20Financial%20Analysts%20Journal%20-%201976.pdf http://www.grahamanddoddsville.net/wordpress/Files/Gurus/Ben...