How many people are actually "beating the market"?

[niffe9]

After reading A Random Walk Down Wall Street and Black Swan I believe that the markets are definitely more efficient and less predictable than most people think. However, the recent success of the hedge fund industry, Warren Buffett’s philosophies, and the simple observation that new information is consistently overreacted to and under reacted to show that the market has lots of inefficiencies.

How many people are actually achieving better than average risk adjusted returns? Is it just Steve Cohen and Jim Simons or is it 10% of mutual funds, 40% of hedge funds, and a ton of people on this forum?

[mosdef]

[ QUOTE ]
After reading A Random Walk Down Wall Street and Black Swan I believe that the markets are definitely more efficient and less predictable than most people think. However, the recent success of the hedge fund industry, Warren Buffett’s philosophies, and the simple observation that new information is consistently overreacted to and under reacted to show that the market has lots of inefficiencies.

How many people are actually achieving better than average risk adjusted returns? Is it just Steve Cohen and Jim Simons or is it 10% of mutual funds, 40% of hedge funds, and a ton of people on this forum?

[/ QUOTE ]

Lots of people are beating the market, it's just a question of:

- Determining who actually deserves to be beating the market (exclude the impact of variance); and
- Accounting for selection bias when absorbing data and anecdotal evidence provided to you.

[hawk59]

I really have no idea. Although keep in mind that beating the market in a one year period doesn't mean anything as a decent % of investors will do that, just through chance. I'd say 5 years is the minimum time where you could say someone is beating the market and even then I'd give more credence to people who said things that made sense rather than people who have used a lot of leverage on one or two bets that worked out for them.

[niffe9]

that's what I meant by "actually achieve better than average risk adjusted returns". The question gets complicated with issues like survivorship bias and the fact that you can't really model the world of investors with a gaussian distribution.

Perhaps better phrased... Forward looking, how many people are implementing investment strategies that yield better risk adjusted returns than the market?

After random walk down wall street and black swan I seem to look at every successful investor and not give up the idea that they could just be a lottery winner. some, like Simons and Cohen have just done ridiculously well and I have no doubt that they demolish the market. However, I still am not sure how much of the market is made of "smart" money. Particularly, I am interested in hearing opinions on how many mutual funds achieve this.

[kagame]

Shanda

[hlacheen]

After everything I have read about the subject, I have very, very little faith in actively managed mutual funds to beat or even match the market.

Some do of course, but they are definitely in the minority.

[PRE]

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After everything I have read about the subject, I have very, very little faith in actively managed mutual funds to beat or even match the market.

Some do of course, but they are definitely in the minority.

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Smaller actively-managed funds can do it very often. It really comes down to the fact that large ones are just too large and can't take advantage of the higher returns that a lot of small companies bring.

[DcifrThs]

[ QUOTE ]
[ QUOTE ]
After reading A Random Walk Down Wall Street and Black Swan I believe that the markets are definitely more efficient and less predictable than most people think. However, the recent success of the hedge fund industry, Warren Buffett’s philosophies, and the simple observation that new information is consistently overreacted to and under reacted to show that the market has lots of inefficiencies.

How many people are actually achieving better than average risk adjusted returns? Is it just Steve Cohen and Jim Simons or is it 10% of mutual funds, 40% of hedge funds, and a ton of people on this forum?

[/ QUOTE ]

Lots of people are beating the market, it's just a question of:

- Determining who actually deserves to be beating the market (exclude the impact of variance); and
- Accounting for selection bias when absorbing data and anecdotal evidence provided to you.

[/ QUOTE ]

i would like to point out that this is one of the most concise, coherent posts i've read on this forum.

thank you sir, and i wholeheartedly agree
Barron

[pig4bill]

[ QUOTE ]
After reading A Random Walk Down Wall Street and Black Swan I believe that the markets are definitely more efficient and less predictable than most people think. However, the recent success of the hedge fund industry, Warren Buffett’s philosophies, and the simple observation that new information is consistently overreacted to and under reacted to show that the market has lots of inefficiencies.

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A lot of people think Random Walk is a pile of BS. I'm one of them.

[bills217]

[ QUOTE ]
[ QUOTE ]
After reading A Random Walk Down Wall Street and Black Swan I believe that the markets are definitely more efficient and less predictable than most people think. However, the recent success of the hedge fund industry, Warren Buffett’s philosophies, and the simple observation that new information is consistently overreacted to and under reacted to show that the market has lots of inefficiencies.

[/ QUOTE ]

A lot of people think Random Walk is a pile of BS. I'm one of them.

[/ QUOTE ]