that's it guys sorry about so many attachments i'm not posting the links because they won't work unless you have an institutional investor subscription
Actually, that was a GREAT quote about the markets. That's the idea that's being debated here... Can the market be quantified scientifically. LTCM failed to realize how organic the markets are. ORGANIC action was what destroyed their system, and profits. The ORGANIC properties to the market are the hardest part to quantify. Trying to quantify human behavior reminds me of the great "Foundation" books, by assimov.
DarkHorse, Excellent Commentary! there's a saying: "don't look the gift horse in the mouth", and its supposed to mean or suggest not to be overly suspicious of a favorable circumstance or outcome. However, to battle hardend veterans, one is taught to ALWAYS look the gift horse in the mouth, otherwise you wouldn't notice that perhaps he needs dental work; and if your point that out, you've made a friend. Well, what we as traders do, is give vent to these vaunted theorums (EMH, etc.). Frankly, I thought I missed another Holders (www.holders.com being developed by Merrill Lynch), and another way to trade the markets. By giving vent to these vaunted thories, we are looking that gift horse (the markets) directly in the mouth, and boy, does it have horrendous breath. It need dental work badly. Hence, EMH is to the Markets, what Icing is to a Cake; namely a means to cover over, dress up, put a smiley face on a pot marked cake. Of couse it doesn't work, however, it (the theory) earned a number of individuals their PhD's. Those glassy eyed theorists were desperately trying to put their arms around the entire market phenonimum, and put some handles on it, so that it could be picked up, inspected, looked at and digested. In reality, for those of us you survive by trading, we know that this gift horse needs the Dentist, and there's nothing efficient about these markets. Just take a look at the frustration of being caught short with a positive Fed announcement, or vise versa.
Yeah. Grossman runs a pretty nice hedge fund. I've read about him over 2yrs ago. In fact, all the "new finance" professors who don't believe in EMH are setting up hedge funds and laughing their way to the bank while they teach on the side. Prof. Andrew Lo of MIT Sloan set up a fund recently in 2000. He's a superquant. There's no numbers yet. Daytraders, don't laugh at the new academics!! They are raking it in too! They are digging hard and doing fine research to find "anomalies" or "inefficiencies" and capitalizing on these. And it's easier for them to raise capital than the average prop trader like us. Prof. Lo raised like $300M practically overnite from a single investor Deutsche Bank. Though trading and education are NOT highly correlated, it absolutely doesn't hurt to have some. I don't know why people are so critical of that. If it's not useful directly in trading for your particular style, it can still be a useful marketing tool to raise capital. For other styles, it's crucial. Read the posting about James Simon who was an award winning math professor who started Renaissance Hedge fund in Long Island. In fact most of the top guys are actually very well educated. Bruce Kovner, Monroe Trout were both from Harvard. And other managers went to top MBA programs or undergrad. Though the stuff they learn in school probably does NOT apply directly to trading, but the discipline of working hard, seeing through things, not quitting when you face challenges(either they be academic, personal, or market catastrophe), etc. are all valuable lessons to be had. good luck trading. -trader99
I have no problem with professors who are intelligent, open minded and smart enough to have researched their beliefs. I enjoy speaking with them. It is just that one expects stupid people to make generalizations and defend them at all cost. I expect intelligent people to analyze and redefine what they believe. I hope that I am willing to do the same. I just find it amazing that people who were supposed to be learned were so wrong and so unwilling to accept reality. I pretty much did not go into the trading field (untill 11 years later) because I believed my econ professors about emh. I grew up in Greenwich, Ct and taught tennis at a club off of Round Hill road. Some of the guys I worked out ran hedge funds. I was sort of set on going to law school but I never really pursued the markets because of a few dopey professors espousing emh in the early 1980's. I do not blame them because I am not even pissed off, but I think of their arrogance and the disservice they did and wonder hey how can guys like these teach our kids during their most formative beer drinking years.