If the Efficient Markets Hypothesis is indeed true, what does it imply for...

Spamalot
Spamalot

If the Efficient Markets Hypothesis is indeed true, what does it imply for traders and investors?

All urls found in this thread:

automated-trading-system.com/trend-following-monkey-style/
en.wikipedia.org/wiki/The_Superinvestors_of_Graham-and-Doddsville
automated-trading-system.com/trend-following-wizard-history/

viagrandad
viagrandad

If the Efficient Markets Hypothesis is indeed true
it is proven that it is not true, therefore there is no value in discussing fantasies

lostmypassword
lostmypassword

Really? Any links?

Playboyize
Playboyize

Welp its true I better give back all the money I have made trading then

ZeroReborn
ZeroReborn

It the EMH is true, does it mean that algorithmic trading is bullshit?

JunkTop
JunkTop

Go look at a stock chart. Any stock chart. Notice it is not a flat line.

Nojokur
Nojokur

If the Efficient Markets Hypothesis is indeed true,

It's not true, markets' time series has a fat tailed distribution which means you can technically make money with a random pick of stocks with random entries, random exits with any kind of trailing stop method, average your picks, manage risk and volatility and still make a shitload of money.

automated-trading-system.com/trend-following-monkey-style/

The major implication is that you can skew the odds further in your favor if you can find a sufficient amout of traders (aka liquidity) that believes the same thing. Be it Fibonacci, trendlines, P/E ratios, Santa Claus or astrology, it doesn't fucking matter. Or you could identify major trends and ride them with appropriate stops
As long as you cut your losses and let the profits run while pyramiding the shit out of any major move, and make sure your risk is tight you will make money.
If you still don't believe me, use a Monte Carlo to generate random price curves, average them and then compare them with a synthetic index.

But who am i kidding this board is full of fucking kids and you won't understand jackshit anyway

MPmaster
MPmaster

What a faggot. If anything you said was true, you'd be a multi-millionaire and the most highly compensated trader on Wall Street. But instead, you're a just a poser.

There are no "tricks" to beating the market. Not for any period of time or quantity of trades to matter.

w8t4u
w8t4u

Are you retarded? The efficient market hypothesis does not predict that at all.

Bidwell
Bidwell

I have worked in prop for 5 years with an audited track record, and some experience as a dealer. I have been using nothing more than trend following systems and if you had 2 working neurons you would be able to f google at least 10 funds that have been around the block for more than 20 years, all of which employ trend following systems

You are a little disgusting cuck and unworthy of my wisdom, get back at shilling your scam coins while i get rich

lostmypassword
lostmypassword

What he is trying to say is this
create 1000000 price curves with a Monte Carlo sim/random number generator with an arbitrary upper/lower boundary
average the data points
congratulations, you got a flat line
now do the same with real price curves
line is not flat, you dun gufd

kizzmybutt
kizzmybutt

No; trading algorithms can work, but they are rare. And they can very quickly stop being profitable. Successful trading with algorithms involves the ability to search for those which are profitable in the present, and to be able to detect when they stop being profitable.

Deadlyinx
Deadlyinx

New information is leaking every moment and the efficient market hypothesis has never claimed to be able to predict the future.

And btw, as soon as you consider correlations in your shitty MC model the line won't be flat anymore.

Methshot
Methshot

blah blah blah 100 confirmed kills blah blah blah

diaf poser faggot

Methnerd
Methnerd

I have stocks that shed 30% overnight, only to gain it back by the end of the week on absolutely no news. Explain that with your fancy space theories and hoky religions

TreeEater
TreeEater

correlation in mc sims
Congratulations, you are fucking clueless
Sure thing kid, now do yourself a favour and start educating your little underage ass, links provided are a start

Sharpcharm
Sharpcharm

average post quality on Veeky Forums

Emberburn
Emberburn

Oh and wait until index fund memesters will start pouring in, you will see the true quality of this thread

Flameblow
Flameblow

But Im already here.

TalkBomber
TalkBomber

???
Are you retarded enough to think that you cant have correlations in an MC model?

I dont believe in efficient markets, but even a 30% drop doesn't discredit it one bit. Efficient markets =/ static world

RavySnake
RavySnake

Says the prop trader, forex hero, options master, crypto stud, day trading legend, Wolf of Wall Street.

Or maybe you're just a NEET faggot who likes to roleplay.

protip: it's choice B

LuckyDusty
LuckyDusty

But Im already here.
kthxbye, enjoy poverty and massive drawdowns
Awwwww he got mad

FastChef
FastChef

Hmmm, with every post you sound less and less like the "successful professional trader" you claim to be. Instead, we get more memes, more leetspeak, and more triggered faggotry.

The true NEET is coming to the surface. Welcome faggot, you fit right in here.

JunkTop
JunkTop

MSCI world index fund +75% in the last 5 years
poverty
my secret magic is much better

Illusionz
Illusionz

Most of the books I've read on trading have essentially concurred with this, or at least the idea that entry points are not nearly as important as money management and risk management and that trend-finding is mostly a self-fufilling prophecy in as much as whatever traders are using to determine trends will determine the trends themselves.

I'm curious to know what other resources you'd recommend (books, or especially videos/lectures).

Garbage Can Lid
Garbage Can Lid

on absolutely no news

Evil_kitten
Evil_kitten

*on absolutely no news that this guy could find
*withouth a single example

LuckyDusty
LuckyDusty

the efficient market hypothesis has never claimed to be able to predict the future.
Except a perfectly efficient market HAS to be able to predict the future, otherwise there is imperfect information and therefore inefficiency in the market.

Nojokur
Nojokur

please tell me you arent this retarded

5mileys
5mileys

it's log normal distribution
this is because the markets can't go below zero and there's technically more of an upside than the downside

efficient markets have a tight spread

Emberfire
Emberfire

Efficient markets a re a function of liquidity. The more liquid a market, the more efficient it will be because of the flow of information per trade. There is truth in the EMH but it breaks down when there is a lack of liquidity.

Raving_Cute
Raving_Cute

you won't understand jackshit anyway
Not bad. I can never seem to tl;dr it.
Appreciate the time you put in to this response.

Lunatick
Lunatick

Example: every stock ever.

You're telling me a company is perfectly valued at 9 AM at $3/share and then is also perfectly valued at $3.20 at 9:20 AM, then is perfectly valued at $2.75 by 10 AM? Stock market is imperfect like everything in life. You have to be slow to think otherwise

Firespawn
Firespawn

muh efficient market
i don't like what you are saying therefore memes
Ok kid. On my first link you will find a dozen of hedge funds that have been beating the market consistently for the last 30 years both in CAGR and in risk adjuted returns.
I urge you to educate yourself or stop posting until you are 18
Coursera has a nice computational investing online course. Cass University had one if i remember correctly.
About the books i would recommend anything written by Nassim Taleb (especially his book on options), Soros' Alchemy of Finance, in which he tackles the EMH meme from a methodologic standpoint, Reminescences of a stock operator and Kroll on Trading Futures. You will have a huge advantage if you know how to code (so you can backtest)
If you want to learn cool stuff about options go to Dough.com.

What you need to know is that there are many ways to make money, and it all boils down to your style and how much starting capital you have.
Mind you, trading and investing are two different things. Trading allows you to have huge returns in percentage, but you get capped on liquidity very soon, while investing is for people who don't have time or big capitals (because attrition costs increase exponentially)

TalkBomber
TalkBomber

*or have big capitals

VisualMaster
VisualMaster

Are you fucking retarded? Perfect information symmetry does not imply that the world isn't changing. Probabilities are constantly changing and perfect markets never claim that every event can be predicted.

Crazy_Nice
Crazy_Nice

Fuck you, you claimed -30% without any news on several stocks you had and cant deliver a single example.
Sad!

likme
likme

muh mutual funds
You know those have been proven to basically be luck based and never perform well in long term, right?

kizzmybutt
kizzmybutt

index fund memesters
Even WB (worlds richest person pretty much) said that index funds are pretty much the best choice.

I guess you are smarter than him.

Playboyize
Playboyize

But does this hold if the EMH is true?

eGremlin
eGremlin

Even WB (worlds richest person pretty much) said that index funds are pretty much the best choice.
Actually he says that 'for most people' index funds are the best choice. Which is equivalent to saying
if you're a brain-dead half retarded pavement ape, don't try to beat the market.

Sensible advice. However it's not the same as saying it can't be done; merely, most people suck too hard to accomplish it.

StrangeWizard
StrangeWizard

if you're a brain-dead half retarded pavement ape, don't try to beat the market
He told his wife to follow the index strategy with her inheritance after his death, I don't think he thinks his wife is a brain-dead half retarded pavement ape.

#btfo

Stupidasole
Stupidasole

Ohhhh boy

whereismyname
whereismyname

I don't think he thinks his wife is a brain-dead half retarded pavement ape.
Maybe he does.

For what it's worth Buffett also wrote a rebuttal of the EMH:
en.wikipedia.org/wiki/The_Superinvestors_of_Graham-and-Doddsville

Stark_Naked
Stark_Naked

grasping at straws this badly

You're like the coyote in the the old roadrunner cartoons. Keep telling yourself that you can beat the market, and never ever look down.

Need_TLC
Need_TLC

Muh survivorship bias.

You know how flawed hedge fund returns reports are? Honestly, unless you have $1 mil+, trying to beat the market is a complete waste of your time.

Raving_Cute
Raving_Cute

I can't beat the market therefore nobody can
the post.

Spamalot
Spamalot

Unlike you, I've got an open mind. Show us the proof that you can beat the market consistently under a statistically significant period of time.

All you have to do is provide evidence and you win the argument. Period.

I'll be waiting, but not holding my breath.

farquit
farquit

I don't need to prove you anything, I just find it a bit rich that you're seemingly using Buffett, a guy who wrote a rebuttal to the EMH, you're trying to using his opinion to lend EMH credence. It's farcical.

Carnalpleasure
Carnalpleasure

can't back up my unfounded statements: the post

Funny how your type always shrinks like a cold penis when asked to provide proof.

PurpleCharger
PurpleCharger

For a true answer:
EMH is the assumption that an assets price reflects all available information.

What does this imply for traders?
That markets are effectively random walks and no profits can be made on top of the given risk premiums.

Ignoramus
Ignoramus

Buffett and Keynes both outperformed the market consistently for significant lengths of time.

Crazy_Nice
Crazy_Nice

Buffett and Keynes
Are you really this stupid? Buffett consistently underperforms the index in bull markets, which is offset by his strong performance in bear markets. It's noteworthy, but hardly consistent.

Keynes was known for taking large risks and having wildly varying results with massive volatility. On a risk adjusted basis, Keynes was a poor investor and the very model of inconsistency.

Further, neither were retail traders dealing in public securities like you or I. If you don;t know the difference between trading and M&A then you really should fuck off back to /pol/.

Evil_kitten
Evil_kitten

moving the goalposts
Well I've seen enough

SomethingNew
SomethingNew

I'm just responding to your posts. Let's look at your post history:

First you claim Buffett's advice has limited application.

Ignoring your earlier statement, then you claim that Buffett hates EMH.

Ignoring your earlier statement, then you claim that anyone can beat the market (except me, apparently).

Ignoring your earlier statement, then you assert that no proof is needed for your outlandish claims.

Ignoring your earlier statement, then you claim that Buffet and Keynes have consistent performance records.

Ignoring your earlier statement, then you claim that I'm the one moving the goalposts.

#btfo

Bidwell
Bidwell

Either you're completely unable to interpret my posts or insurmountable cognitive dissonance is causing you to strawman me to yourself in an attempt to protect your preconceptions about market efficiency. Whichever it is I've no interest in continuing our discourse.

Methshot
Methshot

being triggered so hard you splurge ad homs and ragequit the thread

This, ladies and gentlemen, is the true face of the people who think you can beat the market if you "git gud."

StrangeWizard
StrangeWizard

ohhhhhh laaaaawd, all these thousands of hourse i have spent researching EMH and I forgot to look at a single stock chart and notice it wasnt a flat line to disprove it.

Illusionz
Illusionz

perfect
why do you assume EMH has to be perfect? IMH just predicts that a price of an asset will be correctly priced, with current knowledge and techniques used by the market. For example EMH would say that markets in 1970s were more inefficient than today because inferior statistics techniques were used to price assets.

Lord_Tryzalot
Lord_Tryzalot

That's not true. An efficient market is not the same as a perfect market, first off. Though perfect markets are usually efficient.

And all available information does not mean the future can be predicted, only probabilistically hypothesised.

_______________________________________

The joint hypothesis problem is the reason that EMH will never be proven. All market species are not operating from the same model.

If there are a small number of highly sophisticated investors pushing the markets to efficiency through legal means - they will constantly get burnt by information asymmetry and before long, be pushed out of the market.

MPmaster
MPmaster

Another kid stepping in with his shitposts.
pic related Mulvaney Capital Management
You will see here the performances of the Dunn composite here . I could go on for another week.
The surge of popularity in index funds is due to recency bias. Essentially the generous amount of helicopter money, courtesy of the FED and the impressive economic growth that the West had after WW2 that pinned the index's performances for decades.

Of course the underlying bet is that such growth will continue indefinitely, and the bet in question is made on an instrument over which you have virtually no control over. Talking about degenerate gamblers.
I could have done better had i heavily invested in the telecom industry alone for example. Using the same logical process that led you to put money into an index, and that by definition makes investing useless

happy_sad
happy_sad

He's right, though.
The market is beatable, just not by you.

Carnalpleasure
Carnalpleasure

I could go on for another week.
Do it. Unless you can produce a statistically significant percentage of firms beating the market over a statistically significant period of time, you've lost the argument.

One or two outliers simply proves that EMH is real, especially when Fama has proven that anyone who does beat the market does it by luck.

I'll be waiting, but not holding my breath.

The market is beatable
You can guess a coin flip too. Do it successfully to a statistically significant degree over a statistically significant period of time, and then I'll be impressed.

Until then, you're just another guessing faggot.

You losers keep forgetting that the average investor has a 40 year investing life (age 25-65). "Beating the market" (even if you can do it) for only a few years means you FAIL.

Emberfire
Emberfire

Could easily be explained by survivorship bias - there will always be winners and losers in active management. Guys like Ackmann and Einhorn are incredibly intelligent and have gained great reputations befitting to their track record. However, its interesting to note guys like these pop up every bull run and come off the rails in one of the immediate future bull runs. It wouldn't be outlandish to suggest they're either very well suited to the preceding market regimes or simply the product of survivorship bias when their results don't continue over a longer period. Only Buffet and a handful of investors have stuck around 30+ years and posted consistent alpha.

It's retarded to argue markets are 'efficient' or 'inefficient' because these are practically unattainable states or tautologies depending on how you define them. The reality is all markets exist on a spectrum off efficiency; Livermore's market was much more inefficient than the current one. It's not a leap of faith to suggest that the skill required from an active manager to generate real alpha is directly correlated to the efficiency of the market.

To summarize, I believe what you're saying could very well be true but it extremely difficult to identify the signal within the noise. I'm much more of the philosophies of Buffet and/or PE/VC. In a portfolio this means to exploit reoccurring financial phenomena (e.g. low beta, momentum, a valid quant strategy, etc..) with the majority of capital and take qualitative positions on good business with a smaller amount. There are many ways to beat the market but even more ways to under-perform it.

Would you not concede that most active managers are trash and that the market, while not efficient, is not significantly inefficient?

DeathDog
DeathDog

I just checked out DUNN and Mulvaney. They're both CTAs which is a bit off putting considering those strategies tend to work for quite a few cycles and eventually come off the rails.

Do they revise their strategies for different regimes or is it a golden egg situation? What's your view on them? Are you invested?

I'm sitting on a fuck load of cash at the moment and have been meaning to find some decent decent way to invest in alternative assets/low equity correlation.

GoogleCat
GoogleCat

Then it means that the technical analysis I'm doing and profiting off is just lucky guessing . Reading charts and indicators is equivalent to reading runes and Tarot Cards.
tfw successful wizard
feels magically man

Ignoramus
Ignoramus

What's the argument?
Like I said, the market is not beatable by you.
I don't need to see how you can't do it.

Inmate
Inmate

automated-trading-system.com/trend-following-wizard-history/

Not one or two but 20 outliers. wew
what's your view on them
No idea since i've got a little basket of quantitative models i'm trading, so i focus exclusively on what i'm doing.
But link above covers their performances, you might want to check it out.

But these guys are masters at managing risk, which is even more impressive given their size. I have also explained why trend following systems work and how you could technically make money with random picks And yes, most money managers are shit, i remember reading a bunch of statistics from Morningstar according to which "professionals" fare more or less like retail traders.
But there are outliers who tend to survive and make money consistently.

side note, i know dozens of traders (myself included) who have been able to average 3 digit returns for years on individual accounts before getting capped on liquidity/leverage.

King_Martha
King_Martha

believes in unsourced, unaudited, unreliable performance data
with obvious survivorship bias
on a blog site
from 2010
wew

I guess it's true that there's one born every minute.

Spamalot
Spamalot

You have to predict the markets rather that react to them or have high analytical skills to beat the market.

viagrandad
viagrandad

You can check for audited performances on their respective websites so you can educate yourself instead of being butthurt. Sad!

SomethingNew
SomethingNew

Sorry, my eyes are already raw from the number of ads on the blog trying to sell me super-secret market-beating strategies. I'm not falling for further click-bait.

I especially like how the site has it's own proprietary method of calculating alpha. I guess the industry standard wasn't good enough. Or didn't produce the desired result.

What a joke.

Bidwell
Bidwell

attacks random website from which i found a couple of sourced articles
doesn't even attempt to disprove the fact that EMH is invalid due to price distributions being skewed to the right side of the tail
doesn't know about fat tails and how it is possible to make money with barbell strategies since he has not read Nassim Taleb
visibly butthurt about his money being hostage of an index over which he has no control over
Low energy

kizzmybutt
kizzmybutt

supports a meme trading strategy with all his heart and soul
cherrypicks examples and time frames
cheerleads to the exclusion of rationale critique
disregards absence of scientific validation
spouts memes instead of arguments
Low wealth

Never fall in love with your trades, kid. They don't love you back. Like your mom.

Methshot
Methshot

I have no arguments whatsoever therefore memes
Meanwhile i will further fuel my cognitive dissonance with shitposting so others don't notice it

TurtleCat
TurtleCat

Can't you admit when you're beat, kid?

BinaryMan
BinaryMan

Hmm, I'm the only one between us that's made any critical argument. All you've done is post a blog link.

Typical Millennial. Tweeting a Youtube video doesn't make you a media producer.

Still waiting for some evidence to support your claims....

TreeEater
TreeEater

average three digit returns on average for years
dozens of traders
Absolute bullshit.

King_Martha
King_Martha

You are the quintessential dumb faggot that plagues trading boards. No hate, just know what a dumb prick you sound.

farquit
farquit

If the Efficient Markets Hypothesis is indeed true, what does it imply for traders and investors?

If true, it would imply that profiting from stock trades can only occur under two sets of circumstance:

The trader has hidden knowledge which is not known by the market AND which has not been introduced to the market via market actions.

The trader essentially made a bet on whether a stock would rise shortly after purchase, perhaps on the eve of some press release or government report about the relevant company. He is either right or wrong.

The EMH is patent bullshit though, so no worries OP.

Gigastrength
Gigastrength

You are one of the endless retards who knows nothing about finance and acts like they do.

askme
askme

ITT a bunch of mouthbreathers insulting each other about "believing" in a fact that they don't understand
enjoy your voodoo stock picking magic and fibonacci regressions, makes my indexing that much more profitable when institutional investors with bloomberg terminals rape your assholes

take this retard, for instance
he has no idea that EMH factors in expected return and accepts that stocks are profitable in the long run while only positing that it is impossible to beat the market without taking on more risk
he completely misunderstands the basic premise yet spouts bullshit to others!

iluvmen
iluvmen

makes my indexing that much more profitable
Did you pick up that dividend?
Sweet 1.00346 shares, amirite?

lostmypassword
lostmypassword

8% a year compounded post fees for the past 80 years, nice meme though

Methnerd
Methnerd

for the past 80 years
enjoy your strained peas

WebTool
WebTool

underrated post

Techpill
Techpill

Oh man, you guys sure are a mature bunch!

Can´t you all just stfu, do your own shit and leave the other faggots alone?
Or maybe you wanna talk numbers and compare your actual performances like the Big Guys?
I mean, I´m just a random BA undergrad from Krautistan, but I bet none of you is any better.

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