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No, you're getting it confused. For a start, the fund that I bought into advertised exactly what they expected (it is based on a computerised trading model, so
by brc 13y ago
No, you're getting it confused. For a start, the fund that I bought into advertised exactly what they expected (it is based on a computerised trading model, so they know what to expect if it worked). It is not 'chance' that I happened onto a fund - what we are talking about is random chance that anyone can have consistent above-market returns. Certainly it is possible for any one individual to have a chance occurence of a high return one year- the EMT would say that next year the chance is for a loss. When people or firms put together year on year of consistent returns above market, that is no longer chance.
- truthteller 13y agothere are a lot of investment funds out there. even if none possess any skill, it is possible for a few to produce extreme risk-adjusted performance simply by chance.
- brc 13y agoStill not getting the point here. - One individual or fund doing well in any particular year = random chance - One individual or fund doing well for a decade = chance is not a possible explanation Essentially the chance of getting a heads on a coin flip is a 50/50. If you get heads, it's a chance event. However, if you do 10,000 coin flips and end up with 8,000 heads, either the flipper or the coin have an edge in making heads turn up. The pattern shows that it is no longer a random 50:50 chance.
- PeterisP 13y agoIf a fund has 50% random chance of doing well in a particular year, then 1 of 1000 funds will do well for a whole decade purely from chance. There are thousands of funds, so existance of funds with 10/10 good years should expected even if they are purely random.
- roel_v 13y agoNo, you are not getting the point. When you do millions of 10000 coin flips, the chance that one of them will be 8000 heads is not 50:50. Look up 'birthday paradox'.