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It's tough to know where to begin here. To refute the EMH you don't need a 'surefire winning strategy'. You only need a strategy that is profitable in expectati

It's tough to know where to begin here. To refute the EMH you don't need a 'surefire winning strategy'. You only need a strategy that is profitable in expectation. And it doesn't need to be laid down in advance - all sources of expected return have a half life, and strategies need to be retired when they stop working. That necessitates continuous research. Also, you seem to defeat your own argument. The strong form EMH says that excess returns are not possible, even with insider trading - which you admit can lead to outperformance. The weak form EMH would prohibit excess returns from the announcement effect, but you admit that leads to return predictability as well. Which is it - does the EMH hold, or is the announcement effect real? Your arguments for why momentum, value and equity investing work also don't stand up. There's nothing to be "announced" in those strategies - you could apply them in a vacuum where you didn't know anything except prices and fundamentals. Similarly no insider knowledge is required. So why do you say that they are due to the announcement effect and insider trading? You also misunderstand the scientific method - the failure of an experiment to refute the null hypothesis does not lend credence to the null hypothesis! At most it tells you that the null is consistent with the observations. Moreover, you talk as if the Null Hypothesis is a particular statement, which it is not. There's a great XKCD comic I'd refer you to if I wasn't on my phone! If you want such an experiment, I humbly invite you to consider the past and future returns of the fund I work for, which is 100% model-driven. Although obviously we trade based on our predictions - because at the end of the day we're in this to make money, not to write papers or win internet arguments.

lutusp 14y ago
> To refute the EMH you don't need a 'surefire winning strategy'. You only need a strategy that is profitable in expectation. Yes, and, in spite of its tremendous theoretical importance, there is no such thing. > And it doesn't need to be laid down in advance ... Is this a scientific conversation? Yes? Then yes, it does. Any number of bogus studies can prove their claims if one can change the study's claims as the evidence comes in. > The strong form EMH says that excess returns are not possible, even with insider trading ... Ah, I see -- redefine the EMH, then prove the falsity of the redefinition. The EMH says no such thing. > The weak form EMH would prohibit excess returns from the announcement effect ... Also false. You aren't discussing the EMH, you're making it up as you go along. > There's nothing to be "announced" in those strategies - you could apply them in a vacuum where you didn't know anything except prices and fundamentals. Similarly no insider knowledge is required. So why do you say that they are due to the announcement effect and insider trading? That's easy to answer -- I never said any such thing, anywhere. You're arguing against a position no one has taken. I did say that an legitimate test needs to be conducted in private, with no actual investments -- a computer model defined in advance, that cannot be changed as the study proceeds, and that by definition cannot influence the real market being studied. There are no such successful models. The EMH appears to be true. > If you want such an experiment, I humbly invite you to consider the past and future returns of the fund I work for ... Ah, so you have a dog in this fight. You're not an impartial participant, striving for objectivity. That means I'm wasting my time talking to you -- you're not a scientist, you're a salesman.
- swombat 14y ago
  Whatever the merits of your arguments, your ad hominem at the end, as well as the general tone of your comment, undermine your position almost completely.
  - lutusp 14y ago
    > your ad hominem at the end ... What ad hominem was that? I correctly identified my correspondent as a salesman, not a scientist. It's a simple statement of fact. He thinks one data point counts as evidence, which means he isn't a scientist, and he is objectively in the business of talking people into investing in his fund -- therefore he is a salesman. Simple straight-up facts. And it really is pointless trying to discuss these issues with someone whose livelihood depends on the myth that the market can be tweaked in any way we please.
    - swombat 14y ago
      On the off chance... Perhaps you're like me a decade ago and you don't even realise when you're insulting someone (I was like that). If so, I urge you to realise that just because you don't mean to be insulting doesn't mean you aren't. The last line of your comment was obviously insulting and your comment has been downvoted by others as a result. That's an evident observation. Take it on board instead of disputing it, and if you really did not mean any insult, then think about how you could have phrased that line (and perhaps the rest of your comment) in a way that would not come across as insulting. Learning to not involuntarily insult people is pretty useful.
      - lutusp 14y ago
        > Perhaps you're like me a decade ago and you don't even realise when you're insulting someone ... You have something against salesmen? I described this person as a salesman, after he identified himself as a salesman. Which part of this aren't you getting? He has a vested interest in the position he was putting forth. That fact, the fact that his livelihood depends on the continued belief in the predictability and malleability of equities trading, is germane to the conversation. It prevents objective evaluation of evidence. > ... in a way that would not come across as insulting. Not every salesman is Willy Loman, and the insult you saw is solely in your mind. He said: "I humbly invite you to consider the past and future returns of the fund I work for ..." By referring to "future returns", he went beyond any rational position, and he directly contradicts the position taken by the SEC on this issue (brokers should never make claims about future performance). He is a salesman. Talking to him about this issue is a waste of time. Those are the facts.

lutusp 14y ago

> To refute the EMH you don't need a 'surefire winning strategy'. You only need a strategy that is profitable in expectation. Yes, and, in spite of its tremendous theoretical importance, there is no such thing. > And it doesn't need to be laid down in advance ... Is this a scientific conversation? Yes? Then yes, it does. Any number of bogus studies can prove their claims if one can change the study's claims as the evidence comes in. > The strong form EMH says that excess returns are not possible, even with insider trading ... Ah, I see -- redefine the EMH, then prove the falsity of the redefinition. The EMH says no such thing. > The weak form EMH would prohibit excess returns from the announcement effect ... Also false. You aren't discussing the EMH, you're making it up as you go along. > There's nothing to be "announced" in those strategies - you could apply them in a vacuum where you didn't know anything except prices and fundamentals. Similarly no insider knowledge is required. So why do you say that they are due to the announcement effect and insider trading? That's easy to answer -- I never said any such thing, anywhere. You're arguing against a position no one has taken. I did say that an legitimate test needs to be conducted in private, with no actual investments -- a computer model defined in advance, that cannot be changed as the study proceeds, and that by definition cannot influence the real market being studied. There are no such successful models. The EMH appears to be true. > If you want such an experiment, I humbly invite you to consider the past and future returns of the fund I work for ... Ah, so you have a dog in this fight. You're not an impartial participant, striving for objectivity. That means I'm wasting my time talking to you -- you're not a scientist, you're a salesman.

swombat 14y ago
Whatever the merits of your arguments, your ad hominem at the end, as well as the general tone of your comment, undermine your position almost completely.
- lutusp 14y ago
  > your ad hominem at the end ... What ad hominem was that? I correctly identified my correspondent as a salesman, not a scientist. It's a simple statement of fact. He thinks one data point counts as evidence, which means he isn't a scientist, and he is objectively in the business of talking people into investing in his fund -- therefore he is a salesman. Simple straight-up facts. And it really is pointless trying to discuss these issues with someone whose livelihood depends on the myth that the market can be tweaked in any way we please.
  - swombat 14y ago
    On the off chance... Perhaps you're like me a decade ago and you don't even realise when you're insulting someone (I was like that). If so, I urge you to realise that just because you don't mean to be insulting doesn't mean you aren't. The last line of your comment was obviously insulting and your comment has been downvoted by others as a result. That's an evident observation. Take it on board instead of disputing it, and if you really did not mean any insult, then think about how you could have phrased that line (and perhaps the rest of your comment) in a way that would not come across as insulting. Learning to not involuntarily insult people is pretty useful.
    - lutusp 14y ago
      > Perhaps you're like me a decade ago and you don't even realise when you're insulting someone ... You have something against salesmen? I described this person as a salesman, after he identified himself as a salesman. Which part of this aren't you getting? He has a vested interest in the position he was putting forth. That fact, the fact that his livelihood depends on the continued belief in the predictability and malleability of equities trading, is germane to the conversation. It prevents objective evaluation of evidence. > ... in a way that would not come across as insulting. Not every salesman is Willy Loman, and the insult you saw is solely in your mind. He said: "I humbly invite you to consider the past and future returns of the fund I work for ..." By referring to "future returns", he went beyond any rational position, and he directly contradicts the position taken by the SEC on this issue (brokers should never make claims about future performance). He is a salesman. Talking to him about this issue is a waste of time. Those are the facts.