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> He consistently beats the market and then claims that "managers" cannot. But he isn't beating the market -- he's beating the pants off his followers, people

by lutusp 13y ago

> He consistently beats the market and then claims that "managers" cannot. But he isn't beating the market -- he's beating the pants off his followers, people who dutifully buy the same stocks he does. It's the announcement effect -- Buffett buys a given stock, Buffett is a winner, so everyone responds by buying the same stock: self-fulfilling prophecy. The irony is that the timing of the groupie-purchases assures that money flows from them into Buffett's accounts, because the followers buy too late to benefit. Another effect is that, if Buffett buys stock in a particular company, he is betting that company will grow. Potential customers notice this, prospective employees notice this, the public notices this: it's another self-fulfilling prophecy. Is this a mere hypothesis? Yes, it is. Can it be proven? Only in principle, not in fact. Is Buffett actually a genius? Chances are no one will ever know, and it's certainly not science.

deleted 13y ago
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ellyagg 13y ago
The insult here--"groupie-purchases"--suggests you understand Buffett's existence is a serious blow to your case. As you implicitly acknowledge with your hypothesis of the "announcement effect", the null hypothesis is that Buffett beat the market. It's time you hold yourself to the same standard you demand elsewhere in this thread and prove that "groupies" from 40 years ago maintaining their positions all these years account for Buffett's long term rate of return.
- lutusp 13y ago
  > The insult here--"groupie-purchases"--suggests you understand Buffett's existence is a serious blow to your case. Nonsense. The announcement effect is a well-established distortion of the market: http://www.investopedia.com/terms/a/announcment-effect.asp http://www.investopedia.com/terms/a/announcment-effect.asp > ... to your case. My case? The fact that investment managers cannot produce results has been proven over and over again. It's not my case, it is a simple fact about reality. All you need to do is review the WSJ Dartboard Contest. http://www.investorhome.com/darts.htm http://www.investorhome.com/darts.htm In the Dartboard Contest, managers had every incentive to prove what they could do -- a success would have made them simultaneously rich and famous. They failed. Any questions? > As you implicitly acknowledge with your hypothesis of the "announcement effect" ... "My hypothesis?" You need to learn something about equities. The announcement effect is very well-known. http://www.economicshelp.org/dictionary/a/announcement-effect.html http://www.economicshelp.org/dictionary/a/announcement-effec... Do you suppose I wrote all these articles, and talked a bunch of economists into believing in it? For God's sake. > ... the null hypothesis is that Buffett beat the market. The null hypothesis is that Buffett did not beat the market based on special skills. The null hypothesis is that Buffett's performance has a pedestrian explanation -- chance. That's what the null hypothesis means. http://en.wikipedia.org/wiki/Null_hypothesis http://en.wikipedia.org/wiki/Null_hypothesis Quote: "In statistical inference of observed data of a scientific experiment, the null hypothesis refers to a general or default position: that there is no relationship between two measured phenomena, or that a potential medical treatment has no effect." I can't repair the defects in your education in a series of forum posts -- you will just have to go out and get an education on your own, like a grown-up.

by lutusp 13y ago

deleted 13y ago

[deleted]

ellyagg 13y ago

The insult here--"groupie-purchases"--suggests you understand Buffett's existence is a serious blow to your case. As you implicitly acknowledge with your hypothesis of the "announcement effect", the null hypothesis is that Buffett beat the market. It's time you hold yourself to the same standard you demand elsewhere in this thread and prove that "groupies" from 40 years ago maintaining their positions all these years account for Buffett's long term rate of return.

lutusp 13y ago
> The insult here--"groupie-purchases"--suggests you understand Buffett's existence is a serious blow to your case. Nonsense. The announcement effect is a well-established distortion of the market: http://www.investopedia.com/terms/a/announcment-effect.asp http://www.investopedia.com/terms/a/announcment-effect.asp > ... to your case. My case? The fact that investment managers cannot produce results has been proven over and over again. It's not my case, it is a simple fact about reality. All you need to do is review the WSJ Dartboard Contest. http://www.investorhome.com/darts.htm http://www.investorhome.com/darts.htm In the Dartboard Contest, managers had every incentive to prove what they could do -- a success would have made them simultaneously rich and famous. They failed. Any questions? > As you implicitly acknowledge with your hypothesis of the "announcement effect" ... "My hypothesis?" You need to learn something about equities. The announcement effect is very well-known. http://www.economicshelp.org/dictionary/a/announcement-effect.html http://www.economicshelp.org/dictionary/a/announcement-effec... Do you suppose I wrote all these articles, and talked a bunch of economists into believing in it? For God's sake. > ... the null hypothesis is that Buffett beat the market. The null hypothesis is that Buffett did not beat the market based on special skills. The null hypothesis is that Buffett's performance has a pedestrian explanation -- chance. That's what the null hypothesis means. http://en.wikipedia.org/wiki/Null_hypothesis http://en.wikipedia.org/wiki/Null_hypothesis Quote: "In statistical inference of observed data of a scientific experiment, the null hypothesis refers to a general or default position: that there is no relationship between two measured phenomena, or that a potential medical treatment has no effect." I can't repair the defects in your education in a series of forum posts -- you will just have to go out and get an education on your own, like a grown-up.