Outperforming the market is next to impossible if EMH holds—might as well invest in passively managed vehicles. ???
That assumes the price is right—crashes, bubbles, corrections, overvalued and undervalued equities say otherwise. The 1987 crash drove prices to irrational low levels OR The crash was a rational response to new information OR Stocks were overvalued before the crash. The decline brought them closer to efficient levels. > Of 1,600 NYSE stocks, only 52 moved higher, while 1,973 were lower; 1,192 > stocks hit 52-week lows. The market recovered half its losses the next day. > It took slightly over 15 months for the Dow to regain its level just prior to > the 1987 crash, and almost 2 years to the day to pass its then-record high > that had been set on Aug. 25, 1987 Prices often diverge from changes in underlying value. Some investors gain more, some loose more than the market. Some things are not predictable but they are foreseeable: > > > Paul Tudor Jones—Two weeks before that fateful October day in 1987, the Tudor > Investment Group began positioning itself, trading against the market. walked > away with $100 Million dollars > Tepper’s firm reportedly purchased Citigroup shares at 19 cents to the dollar > and Bank of America at 12 cents to the dollar, in addition to roughly $1 > billion worth of AIG’s commercial mortgage securities at $9 cents on the > dollar. He sat back throughout 2009 and watched them double, then treble and, > in BOA’s, case quadruple within a year. As Appaloosa returned 132.7% by the > end of the year to net, Tepper made a staggering $7 billion. If someone had a system for beating the market they could print money all day all year. PS Jesse Livermore, was the first pairs trader in the late 1800s who described a method of analyzing two related stocks to determine their common price trend. > Morgan Stanley, started to think of the trending pairs not as a block to be > executed but as two sides of a trading strategy. By going long in one and > short the other, the net position was market-neutral. Morgan Stanley allowed > Bamberger to test his strategy and it made six million dollars in the first > year. Nunzio Tartaglia took control of the trading group and reportedly made > 50 million dollars for the firm in 1987 (Gatev et al. 2006). > Tartaglia’s team had been very successful in trading these pairs in 1987, but > in 1989, after two years of bad performance, Morgan Stanley halted its > operation. Donna Y [email protected] <mailto:[email protected]> > On Aug 11, 2019, at 11:04 PM, Devon McCormick <[email protected] > <mailto:[email protected]>> wrote: > > Or you could just invest in index funds. ---------------------------------------------------------------------- For information about J forums see http://www.jsoftware.com/forums.htm
