Hacker News new | past | comments | ask | show | jobs | submit login

Who said it’s a random process? Stock prices don’t go up randomly over the long term.

Joel Greenblatt had 50% yearly returns for a decade.

Renaissance Technologies uses algorithms.

Also, I don’t think you would expect someone to beat the market every year, but over a ten year period, for example.

An important difference. You would expect someone to beat the market every year for ten years just by chance alone, you wouldn't expect it to be any specific person. I expect someone is going to win the lottery, I just don't expect that someone to be me.

Yes, given enough traders, you very much would expect some of them to beat the market consistently, over a decade or more.

I’ve got a roulette “system” too. Trust me, it even has algorithms and machine learning. I’ll sell you the book.

The discussion reminds me of a fun exercise we did in one of my B-school classes: everyone stands up and flips a coin. If you flip heads you sit down and stop the game. Everyone who flipped heads flips again, with the new tails flippers sitting down. At the end when there’s one person left, the prof interviews him, asking “how did you become so skilled at flipping heads?” and “what advice can others take to get as good as you!”

This is what we are doing when we admire stock pickers and try to figure out what their secret is.

Well Claude Shannon and Ed Thorpe did figure out how to beat roullette. And BlackJack. And then Thorpe figured out Black Scholes and made a killing in the markets trading warrents.

See my above comment about how statistics does not bear out your fooled by randomness theory.

I don’t have a dog in this fight but Ed Thorpe has one of his funds liquidated via RICO. He’s usually used as an example in the positive case for “only bad behavior gets outsized market returns” argument.

Scholes & Merton got famously wrecked in the markets.

This is the perfect example of broken telephone. (If you don't know the full story and fail to post any source)

The reason why they got the RICO.

"From 1969 to the end of 1987 the amount invested rose from $1.4 million to $273 million. Its limited partners saw their wealth grow at 18.2 percent annualized after fees. PNP had no losing years — and not even a losing quarter."

The regulators thought that it was a Ponzi scheme based off that information or did they...

"But most knowledgeable observers believed that the charges — filed under the Racketeer Influenced and Corrupt Organizations (RICO) Act — were also intended to get the Princeton Newport principals to testify against Michael Milken, the controversial “junk bond” trader who had upended Wall Street conventions and who had dealings with PNP."

The regulators thought that it was a Ponzi scheme, when in reality, they mastered the tax code and created losses via hedging, which was legal at the time.

"The resulting charges were related to trades that PNP had made to create losses that would offset corresponding gains that arose during the firm’s hedging maneuvers."

"The Princeton Newport attorney, Theodore Wells, a Harvard Law and Harvard Business School alumnus known for high-profile white collar criminal defense, argued that the trades were allowed under IRS regulations. They even had a former IRS commissioner, Donald Alexander, prepared to testify in their defense. The judge would not permit it."

>I don’t have a dog in this fight but Ed Thorpe has one of his funds liquidated via RICO.

First off, his name is Edward O. Thorp https://g.co/kgs/jfpjL1 not "Thorpe"

>Ed Thorpe has one of his funds liquidated via RICO.

Please post a source because almost all of the charges were overturned.

"Ed Thorp, who was not greatly affected by the criminal charges, was able to restart his hedge fund activity. In 2012 Thorp’s net worth was estimated at $800 million."

All of this information came from this source.


See also the Eudaemonic Pie

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact