In short, you're saying that by diversifying your holdings across thousands of companies, you can statistically arbitrage the signal but it is not true. You co

In short, you're saying that by diversifying your holdings across thousands of companies, you can statistically arbitrage the signal but it is not true. You could make predictions for every company in the world but you'd need both the signal to be right most of time, over any time period, be uncorrelated across companies and have an excess return collectable over a period short enough. If any of these conditions are not met, you will not be able to statistically arbitrage it. Take options for example, writing them (selling them) is a strategy you can backtest and it has positive return on average. You can write options on thousand of stocks, every week. But because volatility - on which the option price depends - is correlated across stocks, this strategy will incur a large loss on a financial crisis. Your diversification will not matter. Also, you say that we don't observe the signal but you can't know, maybe we do. There are tons of simpler signals - some of which I cited above - that we still observe.