DISQUS

Abnormal Returns: Potholes on the road to riches Abnormal Returns

  • Michael F. Martin · 4 months ago
    I won't argue with your characterization of buy-and-hold strategy as "avoiding taxes" so long as we're clear who most of the "taxes" are going to -- i.e., to the brokers. Berkshire-Hathaway pays a lot of taxes.
  • David_Merkel · 4 months ago
    This is one of the reasons why I view the EMH as a limiting concept. Competition for excess profits makes the market more efficient. When the market gets too efficiently priced, competition declines (or there is a quant blow-up of some sort), and competition declines. Then the cycle starts again.

    In the limit, the EMH is valid; in the short-run, it takes EMH non-believers to make the market efficient.
  • Michael F. Martin · 4 months ago
    I like this story. But what is the relevant time horizon? Or at least, how can one make rough measurements and estimates of that time horizon?
  • David_Merkel · 4 months ago
    Accurate time estimates are tough here, but they tend to mirror the credit cycle. When spreads are wide, typically there is a lot of opportunity to add value, but not so much when spreads are tight.
  • bionicturtle · 4 months ago
    Nice round up...the other aspect of EMH is "price is fair" (in addition to "free lunch").

    Along those lines, Rebonato argued that the implication of your belief in EMH was: if you believed, your priority is to improve your models. If you don't believe, your priority is to figure out how other market participants/players use their models.

    Re technicians: i never get why pure technicians except to earn any alpha, where is the value add that is the premise for expecting profits. Fundamentalists at least have a claim to earning something...
  • PP · 4 months ago
    What about Paul Tudor Jones? Supposedly he uses the "Elliot Wave Principle."
  • Rick · 4 months ago
    Eddy Elfenbein is talking crap, what about: Soros, Rogers, Tudor Jones, Dunn, Kovner, the guy who owns the Red Sox etc. All of them might not be on the list, but their earnings have been outstanding. Even if some Value Investors have made great money, it's because they have entered at the right time (see sperandeo's take on value investing), and let's not kid ourselves, if the last twenty-twentyfive years hadn't been stained by low rate policies, there wouldn't have been any value investors on the list. And to quote Tudor Jones on Buffett: "His aversion to paying taxes made him a great investor".