Do You Think You Can Beat the Market?

[Eugene Fama]

Originally Posted by SirVLCIV

Eugene Fama - do you realize that you've said nothing that 'A Random Walk on Wall Street' doesn't? Do you realize that most anyone on this board who has considered investing in individual stocks has most likely read that book?

Please do everyone a favor and consider getting a life. Thanks!

That is the second personal attack by you one me in this thread and you are not even part of this discussion. I think maybe you should simply stay out of the thread that I started if you cannot read it without becoming emotional.

[SirVLCIV]

Originally Posted by Eugene Fama

Honestly, I would have thought that actuaries would be smart enough to know better than to try to select individual stocks on their own, yet based on several threads here, some seem to think they know something that the market doesn't. Why? Why waste your time and money when the chances of winning in the long run are so slim? Nobody beats the market in the long run without either taking on additional risk or getting very lucky. Period. If you really want to gamble, take a trip to Vegas.

You created a handle on an actuarial forum with the sole purpose of telling others that they are wrong in a pursuit of which they have undertaken. The pure hubris required to undertake these actions is remarkable.

Inefficiencies exist. The stock market is -not- a purely efficient statistical process. Step away from your theories and actually look at the world around you.

[SirVLCIV]

Originally Posted by Eugene Fama

That is the second personal attack by you one me in this thread and you are not even part of this discussion. I think maybe you should simply stay out of the thread that I started if you cannot read it without becoming emotional.

[Eugene Fama]

Originally Posted by SirVLCIV

Inefficiencies exist. The stock market is -not- a purely efficient statistical process. Step away from your theories and actually look at the world around you.

It is not, but I think it is more efficient than people give it credit for.

If you theorize that the market is innefficient, do you not acknowledge that these inefficiencies may be unprofitable to someone who thinks they know what they are doing when in fact they do not? The market is full of sharks and fish. During a bull market, many fish mistake themselves for sharks.

How often do you think the following happens...a risk factor with some probability becomes known to the public. The price decreases to reflect the probability of the risk. The factor later goes away and the price goes back up. The individual investor who bought in the face of uncertainty congratulates himself for not falling prey to the market's "irrational overreaction" and for "beating the market", when in reality, the investor had simply accepted a riskier situaiton that the market had reacted to completely rationally. The investor thinks he one step closer to being Phil Helmuth when in fact he is one step closer to Dimitri Nobels.

[Pokeytax]

Luckily, all my individual stocks are by necessity fairly and efficiently priced!

[SirVLCIV]

Originally Posted by Eugene Fama

It is not, but I think it is more efficient than people give it credit for.

I don't know - for every person I meet who believes the market is completely inefficient, I meet one who believes it's completely efficient. It's obviously somewhere in between.

If you theorize that the market is innefficient, do you not acknowledge that these inefficiencies may be unprofitable to someone who thinks they know what they are doing when in fact they do not? The market is full of sharks and fish. During a bull market, many fish mistake themselves for sharks.

This seems obvious, but there are also inefficiencies that may be profitable for an intelligent investor. See frank_exams and FMD. What's your return on that so far frank?

How often do you think the following happens...a risk factor with some probability becomes known to the public. The price decreases to reflect the probability of the risk. The factor later goes away and the price goes back up. The individual investor who bought in the face of uncertainty congratulates himself for not falling prey to the market's "irrational overreaction" and for "beating the market", when in reality, the investor had simply accepted a riskier situaiton that the market had reacted to completely rationally. The investor thinks he one step closer to being Phil Helmuth when in fact he is one step closer to Dimitri Nobels.

Certainly, I believe this is common. However, there are also situations that exist where the market DID have an irrational overreaction, and the investor received a return disproportionate to the underlying risks (see, again, FMD and the subprime mess: good post - http://actuarialoutpost.com/actuaria...&postcount=229 ). Mr. Market makes as many mistakes as anyone, and he who can see through the mistakes can succeed in beating Mr. Market.

I don't invest at the moment (still in school, accumulating debt), and when I do, I will most likely initially index all 401(k) contributions while I concentrate on my career and eliminating debt. At that juncture, I am not opposed to possibly experimenting, as long as I'm willing to put in the time necessary, in investing in individual stocks.

[GosuJohn]

If everything is efficiently priced, then he is saying it doesn't matter what stock you choose?

[Westley]

Originally Posted by GosuJohn

If everything is efficiently priced, then he is saying it doesn't matter what stock you choose?

No, even the strongest adherents to EMH don't say that. They might say it doesn't matter what stock you choose, IF you are well-diversified AND the stocks you choose meet your criteria for risk/reward.

[Incredible Hulctuary]

Originally Posted by silverfox

I think you might be overestimating the number of people that have run a 4 mintue mile. Or your opinion of "many people" is much different from mine. Or you consider any time that starts with a 4 a 4 mintue mile.

http://www.stat.colostate.edu/~jah/t...data/mile.info

That's the world record progression for the mile, not the list of everybody who has run a 4 minute mile. Over 700 men throughout history have run a 4 minute mile, and that list grows by 10-20 every year, but the world record is broken only about 3 or 4 times per decade.

[frank_exams]

Fama has continued to discredit himself by admitting to his lack of knowledge, yet feels he has the authority to comment on something he knows nothing about.

You don't know me or anyone on this board for that matter. Frankly, I've forgotten more about the market than you'll ever know.

Ignorance is bliss, but annoying when foisted vociferously on those who know better.

You have no right to comment. The hole you have dug is getting deeper.