painlord2k at libero.it
Wed Apr 17 12:52:16 UTC 2013
Il 16/04/2013 22:54, Gordon ha scritto:
> Mirco Romanato <painlord2k at libero.it> wrote:
>>>> You're describing investment schools of thought. I was talking about
> how dumb
>>>> money actually operates. These features are timeless.
>>> Many economists would disagree that the concept of "dumb money" has any
>> In fact, who want "Smart money"?
>> It would spend you instead of you spending it.
> On this subject, while it seems obvious to our intuitions that there
> must exist "smart money" and "dumb money" (savvy and not-savvy
> investors), it is difficult to identify either. Studies show that
> professional money managers who outperform the US stockmarket in year 1
> are no more likely to outperform in year 2 than those who underperformed
> in year 1. In fact, after expenses, the majority of money managers
> underperform an unmanaged index fund, suggesting that expertise buys
> nothing after accounting for transaction costs.
This is to be expected, because if someone consistently outperformed the
mean (the US stock market, for example) he would become the owner of a
larger part of the wealth in the market and outperforming the mean would
become increasingly difficult.
Over this, if we believe the market is a tool to share and process
informations between the participants, every single participant has not
all informations before the others. And as one actor increase his size
and become a bigger part of the market, he is able to obtain less
informations about other actors and others are able to obtain more
informations about him.
> I do not believe the Efficient Market Hypothesis (EMH) is the final
> truth about the market, but it does nonetheless seem to be a close
> approximation of it. Significant anomalies are infrequent, and those
> which are common are relatively unimportant in practical terms. In many
> cases they can be explained with a broader definition of "risk".
The EMH is about relative efficiency: the market is more efficient
compared with other not free solutions. And this happen because the
actors are free willed and not rule bounded re-actors.
> I think the pursuit of alpha (returns in excess of the market, adjusted
> for risk) is an almost but perhaps not completely futile endeavor, at
> least in large highly liquid markets like the US stockmarket. Small
> emerging markets like that for Bitcoin offer better opportunities for
> alpha, at least in theory, as they are still in their infancy and
> probably not very efficient.
If we suppose the best managers are employed by the biggest firms in the
biggest markets in what is a selection process where the best go up the
food chain and the worst go down, we could understand that any new
market have a lot of unselected actors. As time and trade go on, the
selection process will put out of business the worst managers and
increase the size of the best.
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