Alan Selwood;35862 wrote:Getting down to the basics of betting, you have organisers taking a percentage, and participants that individually either win or lose, often in sequence.
If the organisers survive, it means that the aggregate bets by the customers are losers overall.
Anyone who says he can consistently beat the system is like the investor who says he can do market-timing to perfection, while others can't.
Interestingly, the most highly-rated investment managers deny that they can do market-timing successfully. Terry Smith for one, but there are plenty of others.
Again perhaps not a million miles away from a fund industry, in which managers get paid regardless of results, and outperformance (the selling point of funds and complex products) is only possible so long as most investors keep underperforming
With market timing ... For someone like Terry Smith or Warren Buffett to market time, they'd need to be so far ahead of the curve (nearly impossible), because the positions they hold are so large, it can take time to actually find enough buyers to sell out of something ... Unlike most of us, who can liquidate a portfolio in an afternoon
People still hold up market timing as something that's 'impossible' – past prices don't have any sway on future prices, etc. – yet the foremost theorists of efficient markets (Fama and French) have identified that momentum not only exists in markets, but is the strongest market anomaly they've ever measured ... And momentum does allow you to market time with (say) 90% success ... A simple example I mocked up in PV, just buying stocks when stocks are doing well, and bonds when they're doing well ... One of the world's largest hedge funds actually does something no more complicated than this
=1&timingUnits[0]=2&timingWeights[0]=25&timingPeriods[1]=6&timingUnits[1]=2&timingWeights[1]=25&timingPeriods[2]=12&timingUnits[2]=2&timingWeights[2]=20&volatilityPeriod=20&volatilityPeriodUnit=1&volatilityPeriodWeight=30]Portfolio Visualizer market timing