How so?Skyquake
Your logic runs in the face of all Fundamental analysis as well.
I don't think this is an issue.
Retail Traders are using vastly smaller capital bases.
As such they can be very nimble with their entire account.
With the power and knowledge available to retail traders NOW and not before why wouldn't you incorporate it.
Buffet sized players will probably need to look at $1bil+ MC before they even begin. They can arguably use ML/algos to look at 10 x $100m co's or 100x $10m co's but still they'll need to review each one on a case by case scenario.Skyquake
Your logic runs in the face of all Fundamental analysis as well.
If retail can spot an under valued stock so too can the bigger players and the were doing it before computers as was everyone else.
Just to clarify; do you mean qualitative? (see bold)How so?
Quantitative judgement is not easy, if possible at all, to backtest. Despite the lack of 'objectivity' I will take an understanding of competative advantage (for example) as an edge any day over the best looking back test equity curve from the most sophisticated computing power available.
Just to clarify; do you mean qualitative? (see bold)
Point is any hedge fund can go wide and trade in $5k parcels across 50,000 stocks. They can be nimble too.
Yes I get that-----you see bots plugging away all the time.
But 2 things come to the Ducks Potato head.
(1) With such a broad base aren't results less likely to out perform and more likely to conform with the returns seen in an/the index?
(2) In the case of a sudden move they still have the same problem getting out in a hurry.
This can be seen when funds take large hits like everyone else. Some of the smaller retail guys get out before and I know a few here have when they have seen/suspected it coming.
I would love to see AI beat a professional poker player and to be honest I'm not sure that it could. In poker, maths has very little to do with anything. Bluffing is everything. Good poker players can change the way the game is played to their advantage ie, get people to change their thinking. They could probably get an AI to modify it's thinking too right before they punish it.
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It seems like they are just trying to justify their management fees. Right now the average joe is probably thinking heh if I think the market is going up why don't I just stick my money in an index fund.
If you put your money in an index fund after the GFC and just held it you would be laughing right to the bank right now.
I think a minimum standard for any system is whether it just just beat buying and holding an index fund forever. If you can't beat that by a significant margin why waste your time.
Diversification and low draw downs are more important than absolute returns for high net worth portfolios.
Well that's true because high networth individuals have to be concerned about asset allocation etc moreso then someone with a full time job who has money set aside for trading but the point is the same but it would only apply to the portion of the portfolio that is set aside for equities. Obviously, I am not suggesting someone go and take their portfolio which is say only 20% equities and then go sell all their property and go put it in an index fund. It applies to the portion of your portfolio that is set aside for trading in the equity markets. It equates to simply a question of whether you're beating the market while being in the market since you're in that market with a certain amount of your portfolio in the first place.
I wasn't really talking about other assets, just the part of equities portfolio. A high net worth individual will pick a fund that has achieved a 30% gain with a drawdown of 15% over a index fund that may have achieved 40% gain with drawdown of 35% eg. like GFC type of periods for the majority of his portfolio. It's not wasting time to under return the index like you have put it if you are doing so with much lower risk. You only mentioned absolute return vs index while risk and draw down is actually what is more important for a fund because investors will sell out and reallocate when there is a big dip without participating in the recovery.
This is incorrect. High level poker is all maths, down to what hands to bluff with. You can prove mathematically how many hands you should be bluffing with and the ratio of bluffs to value bets in any given situation and you can prove mathematically what hands you should be bluffing with as long as your initial ranges leading up to that point is correct. The trouble with AI is that the game is so large and so complex that no computer has been able to solve it and currently the best human players can beat AI in no limit games.
The best players in the world like Ike Hakton, Doug Polk and OTB Red Barron play a highly mathematical game. OTB Red Baron is substantially better at no limit holdem then say Phil Ivy who is recognised as the best all round poker player in the world. However, he is certainly not the best no limit holdem player in the world. Phil Ivy plays the old school exploitative strategy where as OTB plays a highly mathematical game and crushes the competition.
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