
Are random trading strategies more successful than technical ones? (2013) - reedwolf
https://arxiv.org/abs/1303.4351
======
wcoenen
From the conclusion:

> _Our main result, which is independent of the market considered, is that
> standard trading strategies and their algorithms, based on the past history
> of the time series, although have occa- sionally the chance to be successful
> inside small temporal windows, on a large temporal scale perform on average
> not better than the purely random strategy, which, on the other hand, is
> also much less volatile. In this respect, for the individual trader, a
> purely random strategy represents a costless alternative to expensive
> professional financial consulting, being at the same time also much less
> risky, if compared to the other trading strategies._

The reference to "expensive professional consulting" doesn't make sense to me,
because that wasn't a studied strategy. The non-random strategies that the
study compared with were all deterministic rules based on technical
indicators.

It's still interesting that those rules didn't do better than random while
having higher volatility.

~~~
daniel-s
Aren't fund managers on average slightly less successful than the index?
Throwing darts at a board or using a capuchin monkey to decide (random
allocation) is a better strategy than investing in a managed fund.

Not a joke, an actual observable/measurable fact. [1]

[1] [https://www.cnbc.com/2019/03/15/active-fund-managers-
trail-t...](https://www.cnbc.com/2019/03/15/active-fund-managers-trail-the-
sp-500-for-the-ninth-year-in-a-row-in-triumph-for-indexing.html)

~~~
NoOneNew
Just to clarify a bit. This is about long, passive holds compared to active
trading. On average, you're better off staying long by diversifying on 500
large, successful companies, compared to picking choosing random companies on
short term flips. Investing in the S&P is about as strategic and complicated
as betting who is going to win in a fight: Connor McGreggor or a semi-truck
carrying 50,000 pounds of lumber going 70mph. The S&P is and index of the
largest 500 companies out there. Either they are doing well/better or the
entire economy is going straight to shit... because, in essence, they are the
economy. This article technically argues against throwing darts on a board
because active managers act as the dart throwers.

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kaminar
The basic assumption that markets are random is incorrect. Therefore you can
theorize until you're blue in the face and it won't make a difference.

