tag:blogger.com,1999:blog-5880610.post6168026909724179881..comments2024-01-13T18:57:18.243-05:00Comments on Information Processing: EMH vs Macro, Fischer BlackSteve Hsuhttp://www.blogger.com/profile/02428333897272913660noreply@blogger.comBlogger22125tag:blogger.com,1999:blog-5880610.post-15236288039181104262013-01-04T21:11:14.411-05:002013-01-04T21:11:14.411-05:00The hedgies are way, way more secretive than the d...The hedgies are way, way more secretive than the derivs quants - for what that is worth.<br />I will try anything except to stop drinking. ;-)LondonYoungnoreply@blogger.comtag:blogger.com,1999:blog-5880610.post-74979540403699551212013-01-03T00:01:19.890-05:002013-01-03T00:01:19.890-05:00Even model minority Steve has admitted that when E...Even model minority Steve has admitted that when Ed Witten drops trou he cries. <br /><br />Given the same "knowledge and analytic skills" do you see any inefficiencies? Do you expect such will persist? If not then .... maybe ... hmmm .... <a href="" rel="nofollow">"not have way"</a>. Even if PTJ, Soros, etc. are idiots or cheats there is still alpha <a href="http://gide07noreply@blogger.comtag:blogger.com,1999:blog-5880610.post-47896478256097738972013-01-02T21:05:35.298-05:002013-01-02T21:05:35.298-05:00Ouch, so harsh on the psych types! Let's assu...Ouch, so harsh on the psych types! Let's assume they can't help us.<br />How should I tell whether my belief in it being difficult to beat the market is an honest result of my knowledge and analytic skills vs. being the answer to a psychical need presumably based in my fear to try my skills against the market? The eye sees not itself .. help me out here ...LondonYoungnoreply@blogger.comtag:blogger.com,1999:blog-5880610.post-24515360142957381642013-01-02T00:25:21.016-05:002013-01-02T00:25:21.016-05:00And a billboard on the road to Galt's gulch sa...And a billboard on the road to Galt's gulch says, "Wall Street and entertainment types proceed further at your own risk." Buffet et al are d-bags, but quants are pushing the "technology" of finance forward. Who's flattered?gide07noreply@blogger.comtag:blogger.com,1999:blog-5880610.post-75075889650144172022013-01-01T13:14:35.076-05:002013-01-01T13:14:35.076-05:00Oh, and Psych 101 would tell you that now I am por...Oh, and Psych 101 would tell you that now I am portraying Buffet as taking advantage of widows and orphans - a sure sign of my psychical need - which I suppose is your actual point ;-)LondonYoungnoreply@blogger.comtag:blogger.com,1999:blog-5880610.post-2333864576026945682013-01-01T13:08:17.846-05:002013-01-01T13:08:17.846-05:00Not much that you say here that I object to, thoug...Not much that you say here that I object to, though I think much of it is complementary rather than contradictory to my points. When investors opt into the zero sum speculation game, some will win and some will lose - and along the lines you lay out, it won't be random, the skilled will win the unskilled's money - but it is still a tough zero sum world. And I don't even disagree LondonYoungnoreply@blogger.comtag:blogger.com,1999:blog-5880610.post-44911037376187654642013-01-01T00:48:57.456-05:002013-01-01T00:48:57.456-05:00Is there any other field of competition where ther...Is there any other field of competition where there aren'tgide07noreply@blogger.comtag:blogger.com,1999:blog-5880610.post-24121847217631043352012-12-31T18:11:45.672-05:002012-12-31T18:11:45.672-05:00Well, the wikipedia (at this moment) calls him a &...Well, the wikipedia (at this moment) calls him a "business magnate" first and "investor" second (and philanthropist third!) - how about business magnate instead of captain of industry? Maybe we don't disagree? I apply EMH to ordinary Joe Blow's, but Buffet started his career as the only son of a U.S. Congressional Rep. - and he has never left that congressional LondonYoungnoreply@blogger.comtag:blogger.com,1999:blog-5880610.post-87573619479637835292012-12-30T19:26:16.216-05:002012-12-30T19:26:16.216-05:00Your description of Buffet's mo is false. and ...Your description of Buffet's mo is false. and it surprises me coming from you. '"captain of industry" if you will' describes people like Icahn and KKR, LBOmeisters and greenmailers. Berkshire became mostly an "operating" company only 10 y ago IIRC, and Buffet has always been hands off of his investments. He may be or may be on occasion hands on for those cos gide07noreply@blogger.comtag:blogger.com,1999:blog-5880610.post-1089302711338856912012-12-30T12:02:51.208-05:002012-12-30T12:02:51.208-05:00To cover some basics - if the market is the sum to...To cover some basics - if the market is the sum total of all investments, they the average performance of all investors must be that of the market. Next, large diversified funds are available cheaply that will pretty much guarantee a market outcome. Thus, the group of individuals seeking to beat the market are playing a zero sum game. So, I agree people can beat the market, but only by LondonYoungnoreply@blogger.comtag:blogger.com,1999:blog-5880610.post-22458039745840396672012-12-29T07:02:42.181-05:002012-12-29T07:02:42.181-05:00@LondonYoung
I don't think it's only few ...@LondonYoung<br /><br />I don't think it's only few individuals that can beat the market, if you're referring to someone like Warren Buffet, of course, that's true, but there are people that have solid gains over the years, nothing spectacular, but beat the markets on regular basis (although in many cases it could be pure luck).<br /><br />As in everything, if you want great gainsHauser Quaidhttp://www.facebook.com/hauser.quaid.3noreply@blogger.comtag:blogger.com,1999:blog-5880610.post-15685017363176446082012-12-29T02:23:58.320-05:002012-12-29T02:23:58.320-05:00I assume you are not a money manager. Are you conv...I assume you are not a money manager. Are you convinced of the great difficulty of beating the market for fear of leaving your gilded cage or vice versa? What holds a GS partner back from starting his own shop?gide07noreply@blogger.comtag:blogger.com,1999:blog-5880610.post-50665265038876276542012-12-29T00:10:19.683-05:002012-12-29T00:10:19.683-05:00so, maybe it is only possible enough that a few in...so, maybe it is only possible enough that a few individuals are able to make a decent living, but not much more than that. Agree?LondonYoungnoreply@blogger.comtag:blogger.com,1999:blog-5880610.post-10938609725258537592012-12-28T11:10:31.585-05:002012-12-28T11:10:31.585-05:00Hauser - if that is your understanding of EMH, the...Hauser - if that is your understanding of EMH, then you are about 40 years behind current practitioners. If you want a good overview of the modern empirical work that has been done, look at Antti Ilmanen's Expected Returns. The book has a lot of breadth, and if you want to go into depth on any of the topics he covers, he provides the underlying papers for those who'd like to understand DKennyhttps://www.blogger.com/profile/05250596612594579491noreply@blogger.comtag:blogger.com,1999:blog-5880610.post-38537145586496396832012-12-28T03:37:38.978-05:002012-12-28T03:37:38.978-05:00I'm not saying market is easy to beat for an i...I'm not saying market is easy to beat for an individual. I'm saying that the EMH claim that the price of a stock is a reflection of all available information and that there is no way to give a better assessment, a joke. It's a completely another thing why most people give even a worst prediction of a market. Look for example at the housing bubble, everyone (well, not everyone) was Hauser Quaidhttp://www.facebook.com/hauser.quaid.3noreply@blogger.comtag:blogger.com,1999:blog-5880610.post-7189956959246215112012-12-27T22:37:31.696-05:002012-12-27T22:37:31.696-05:00You are right to be confused. Issue no. 1: numera...You are right to be confused. Issue no. 1: numeraire.LondonYoungnoreply@blogger.comtag:blogger.com,1999:blog-5880610.post-69599620357036828882012-12-27T22:32:23.810-05:002012-12-27T22:32:23.810-05:00hmmmm, I totally recall that lots of people dislik...hmmmm, I totally recall that lots of people dislike EMH because they think the market is easy to beat, but beware making such a statement unless you are directing all the cash in that you wish to direct ... now, as Dr. Hsu will remember we spent many a weekend in Las Vegas proving your point, but we the scale seemed to be limited to hotel rooms, prime rib, all you can eat (unpeeled) shrimp, freeLondonYoungnoreply@blogger.comtag:blogger.com,1999:blog-5880610.post-48154059992799671832012-12-26T10:55:56.230-05:002012-12-26T10:55:56.230-05:00Some thoughts, meant in the most charitable way! ...Some thoughts, meant in the most charitable way! <br /><br />* Fischer Black: interesting, thoughtful, original guy. We need more like him. <br /><br />* Macro and finance. There's some specialization, to be sure, but lots of people know both macro and asset pricing, including several recent Nobel prize winners. In most modern work, quantities (macro) and asset prices (finance) come out of David Backushttp://profiles.google.com/david.backusnoreply@blogger.comtag:blogger.com,1999:blog-5880610.post-72012639699743406492012-12-26T03:50:26.457-05:002012-12-26T03:50:26.457-05:00Kling has answers his own question:
"It see...Kling has answers his own question: <br /><br />"It seems to me that the market monetarists (e.g., Scott Sumner) believe something closer to (2) than to (1). But (2) can get you into some strange conundrums. Does the Fed have free will? That is, does it have the ability to surprise markets, other than by acting randomly? If its actions are not random, they should be anticipated by markets. John Salvatiernoreply@blogger.comtag:blogger.com,1999:blog-5880610.post-35980048067221295452012-12-25T19:34:23.205-05:002012-12-25T19:34:23.205-05:00I think this is an awfully broad overstatement. Mo...I think this is an awfully broad overstatement. Modern empirical finance has done work with a 'finance' view, and it is not a small amount. John Cochrane wrote his book 'Asset Pricing' at the beginning of the last decade, and advocated strongly the predictability of returns over longer time frames based on a multitude of macro factors. Even Fama himself has done plenty of work on DKennyhttps://www.blogger.com/profile/05250596612594579491noreply@blogger.comtag:blogger.com,1999:blog-5880610.post-1706956648865586632012-12-25T12:06:27.811-05:002012-12-25T12:06:27.811-05:00EMH is a joke. The inability of most people to bea...EMH is a joke. The inability of most people to beat the EMH is another story it says something about very poor ability of people to:<br /><br /><br />1. objectively weight the available information about the whole system<br />2. quantify the probabilities for events. For example, you can be very knowledgeable about some sport, and you might have a very deep understanding about the conflict of twoHauser Quaidhttp://www.facebook.com/hauser.quaid.3noreply@blogger.comtag:blogger.com,1999:blog-5880610.post-69769347762999256022012-12-25T11:42:25.014-05:002012-12-25T11:42:25.014-05:00I recommend Black's essay "Noise": ...I recommend Black's essay "Noise": http://www.e-m-h.org/Blac86.pdf<br /><br />The ocean would be flat if the earth did not rotate, have a moon, etc. The Earth's gravitational field is clearly a big contributor to the total forces on the oceans, but it won't predict its behavior well because it is far from the whole story. EMH asserts a sort of martingale condition on the SethTSnoreply@blogger.com