That's certainly true, but blind squirrel/acorn and all that. Do they make money because their system works with predictability, or the time frame we observed their results too short.

Virtually every study shows that money managers (all types) are beaten by 'the market' over long periods of time. If technical analysis worked, many would use it, which would either reduce it's effectiveness by eliminating any advantage it had, or succeed by self-fulling prophecy.

The Russell 50/200 cross has been met. Prices should fall, but all we really know is that stock price growth has slowed/stopped. The direction of future price changes will be determined by fed policy, technological developments, political changes, investor 'mood' and natural phenomena. Recent price behavior is only relevant as it relates to investor 'mood' and expectations.

Everything I 'know' tells me it's BS, including the back-testing I did, but it is hard to ignore.

Conclusion: I have no idea

Buffet may be right. Ignore the background noise (unless its deafening like the Great Recession), invest is solid businesses and profit.

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Posted by Doc Fenton

New York, NY

Member since Feb 2007

52698 posts

Posted on 10/3/14 at 6:24 am to Ole War Skule

quote:
Do they make money because their system works with predictability, or the time frame we observed their results too short.

Yes.

The momentum Asness is talking about is sort of medium term time lengths I think, but there are high frequency algorithmic trading strategies that apparently work at shorting time scales.

I'm trying to learn a little bit about them, but my gut instinct is to believe that those algo trading profits will gradually fall off to being much smaller than there were a few years back during their golden era.

quote:
Virtually every study shows that money managers (all types) are beaten by 'the market' over long periods of time.

Only for mutual funds after fees though.

There are studies showing that elite active investment managers will beat the market, but typically (i) their funds are not publicly available for all investors, and (ii) the majority of active managers will only generate a little bit of alpha through research and skill, but not enough to cover the cost of their management fees.

And of course top private equity and venture capital funds beat the crap out of everyone in terms of returns.

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