3 ms·
Think of it like a drug trial: the control is the stock market, the drug is your strategy. If (somehow) beating the market was a 50-50 chance (which is like sa
by throwawaymsft 12y ago
Think of it like a drug trial: the control is the stock market, the drug is your strategy.
If (somehow) beating the market was a 50-50 chance (which is like saying a randomly written chess algorithm has a 50-50 chance of beating Kasparov), the chance of 40 years of gains is 1/2^40, which is less than 1 in a trillion.
I'd say that's sufficient evidence to reject the null hypothesis, that the drug is no better than placebo. Just because we don't understand the mechanism doesn't make it chance.
- gonvaled 12y agoI do no get this. How is the chance of gains less than 1 in a trillion? This is not an all-or-nothing bet: outperforming the market by a very tiny margin also qualifies him for the title. So you do not really need 1 trillion managers to get this 1 lucky manager. Much less will suffice - maybe even a couple thousands, which are easily active on the market all the time. So, he very well could be the lucky monkey.
- throwawaymsft 12y agoThe typical claim is stock market returns are entirely random, not based on skill, so any returns that beat the perfectly efficient market are purely due to chance. Beating the market (no matter the margin) is purported to be a 50-50 chance, and doing so 40 times in a row would happen by chance less than 1 in a trillion times. (That is, if you accept the premise that stock market investing has no skill component.)