Elite Trader School

[deaddog]

There’s pretty much a revolving door between academia and high finance. Many leading researchers end up launching, cosponsoring, or consulting to hedge funds and investment banks. The factor primer you tried to read is what billions if not trillions of dollars of strategies are based on or benchmarked against.

You can’t understand the opportunity and how to play it if you don’t know much about its nature.

Here are some good resources for a 12 year old:
First: Introducing factors and smart beta | iShares - BlackRock
then: a766ef6b-cd24-4460-8163-900323fc2957 (msci.com)

Thank you for an explanation I can understand.

So portfolio management is based on a bunch of factors. The investment managers look at all these factors and come up with a portfolio to give you the best risk adjusted return.

With all this knowledge and research power, millions of dollars spent on talent, you would think portfolio managers would have no problem out performing the S&P 500 index. This doesn't seem to be the case as academics have proven time and time again that the market is random and can't be beaten.

Could it be that the more you know the worse your performance is?

 

[longandshort]

Thank you for an explanation I can understand.

So portfolio management is based on a bunch of factors. The investment managers look at all these factors and come up with a portfolio to give you the best risk adjusted return.

With all this knowledge and research power, millions of dollars spent on talent, you would think portfolio managers would have no problem out performing the S&P 500 index. This doesn't seem to be the case as academics have proven time and time again that the market is random and can't be beaten.

Could it be that the more you know the worse your performance is?

The opposite. There are still many active funds that act as closet indexers — which means that they do not have an edge (analytical, behavioral, or informational). That’s why I’m the info chart I posted, the average fund manager is also unable to consistently generate performance, even though they have information.
It’s like you can take a class on calculus and that isn’t good enough to be above average in math.

You must go above and beyond the average in order to outperform, by definition.

The best firms, which consistently outperform, are constantly pushing the envelope. If you’re a small retail trader, you have some advantages structurally which can help you consistently outperform, but you must still be highly informed.

 

[hoffmanw]

I call BS on that quote's origins. We all like to attribute severe proverbial wisdom to the Chinese people.

Guys, they invented gunpowder and the abacus. That's it. Now they are commies and do nothing but copy everyone else's ideas. F them.

That phrase came from Anne Ritchie's novel in the 1880s. China ain't getting credit for that.

Please don't say that! Chinese civilization is very ancient. Mostly likely They started everything. Chinese civilization can be dated back to 22,000 years ago when they started farming. The West is an innovator, not an inventor. When they started farming, life became easy. They got a lot of time to think and to create. Many things like machinery, music, arts, philosophy, religions, foods as a result.......

Even modern China totally had strong influence on the West. Thanked to the early Portuguese, Italian and Spanish explorers couple centuries ago. They went to China and brought back Chinese literature and culture. It sparked the Age of Enlightenment and Renaissance, which totally changed European culture forever.

Even the mighty USA was a creation of old Chinese money. You can thank to a bunch of opium traders from New England in America traveled to China and made tons of money. When they came back to America, they started early US industries and higher institutions e.g. hospitals, Trinity Church, Harvard University, Yale University, Princeton University and other Ivies . They also funded the Revolution Wars again the British. Many US presidents were actually the descendants of these opium traders.

 

[Overnight]

...

Even modern China totally had strong influence on the West. Thanked to the early Portuguese, Italian and Spanish explorers couple centuries ago. They went to China and brought back Chinese literature and culture. It sparked the Age of Enlightenment and Renaissance, which totally changed European culture forever...

Then how do you explain this?

Dude, ancient China is not modern China. If they were so inventive, how come they did not discover simple things like electricity and the atomic nucleus? Because they were still so hung up in the prowess of gunpowder and shit. GTFO.

 

[kmiklas]

Finished Article 4 from first link today, "Economic Models: Simulations of Reality." This quote blew my mind:

models can be rather complex: some models that seek to predict the real level of output of an economy use thousands of complex formulations that go by such names as “nonlinear, interconnected differential equations.”

Damn, I thought my models based on the SnP were bad-@$$... looks like I have a lot to learn! I'll have to dig out my old Calc book XD.

Also...

The information should take a casual reader 1-2 weeks to complete, starting from economics and ending with factor analysis.

@longandshort, not sure what you're smoking, but I need some of that $hit. 1-2 weeks? Are you out of your mind??? I've been reading one article a day, and have to re-read the next day before I start the new article. A quick count of articles in just the first link reveals about thirty.. I'd put the timeframe on JUST THIS at a month. At least, for someone like me, with a Math/CS/IT background. It's all new to me.

They say the more you learn, the less you know. I feel like I've just learned the primary colors.

 

[themickey]

.....They say the more you learn, the less you know....

An intelligent person's biggest issue is diving deeper and deeper in to a multitude of rabbit holes. There are only a certain amount of hours in a day and a person needs to eat and sleep and trade somewhere in there.

Now take a relative simpleton trader (that's me), they have a simple system and all which is required is continually pounding out the same trades over and over.
No distractions, boring as batshit, like a wheel going round in circles.
Not too much intelligence required, probably the dumber the better because these types (me) lack intelligence to get into rabbit holes.

 

[virtusa]

So portfolio management is based on a bunch of factors. The investment managers look at all these factors and come up with a portfolio to give you the best risk adjusted return.

That is the theoretical approach/logic.

With all this knowledge and research power, millions of dollars spent on talent, you would think portfolio managers would have no problem out performing the S&P 500 index. This doesn't seem to be the case as academics have proven time and time again that the market is random and can't be beaten.

That's the reality. Each year on the performance list of all funds, over 50% of all funds lose money. And an even bigger number cannot beat the index.

Could it be that the more you know the worse your performance is?

Each problem has an optimal solution. The optimal solution is the point were adding info starts to decrease performance. It is like a hyperbolic line. At first the performance goes up exponentially, at some point it stops to increase and after that it starts to decrease.


The quality of the information is more important than the quantity.
For example:
Adding 5 indicators that are all based on the same basics will always give the same outcome, so you don't need 5 of them, 1 is enough.
Only add an indicators if he helps to improve the performance of the system. It should make things clearer when the rest of the system is not clear. Indicators should be complementary to each other.

 

[virtusa]

They say the more you learn, the less you know.

You should be careful with oneliners.

The more you learn, the bigger the possibility that you will realize that you learned a lot you don't really need.

Whether what you learned was useful or not can only be known in hindsight.
And that is logical. Because if you would know it before starting, it would mean that you already know what you want to learn.
That's why many scientist do a lot of research that results in nothing.

 

[themickey]

That's why many scientist do a lot of research that results in nothing

Similar to ET maybe, it gets to the point of reading just for entertainment, because by far the majority of information goes in one ear, out the other for most of us.
I'm sure the majority of gems posted on ET have not been recognized.

 

[virtusa]

Similar to ET maybe, it gets to the point of reading just for entertainment, because by far the majority of information goes in one ear, out the other for most of us.
I'm sure the majority of gems posted on ET have not been recognized.

There is no universal system that works always everywhere. Each trader builds his own system, which means that what is a gem for one can be totally useless for another trader. Most gems are only gems in combination with other things.

I'm sure the majority of gems posted on ET have not been recognized.

Idiotic posts are many times not recognized too on ET.