<story><title>Day Trading for a Living?</title><url>https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3423101</url></story><parent_chain><item><author>inerte</author><text>Someone will always beat the market, because that&amp;#x27;s what we&amp;#x27;re looking for.&lt;p&gt;I think it was on &amp;quot;Thinking Fast and Slow&amp;quot; that I read it&amp;#x27;s pointless to analyze the stock market winners, since it&amp;#x27;s a random process. Imagine there are 30 million entities that own stocks in the US - individual, companies, funds, etc... If on a given year half of them did better than average (with some rounding liberty):&lt;p&gt;&lt;pre&gt;&lt;code&gt;  1st year: 15M better than average
  2nd year: 7.5M better than average
  3: 3.25M
  4: 1.6M
  5: 800k
  6: 400k
  7: 200k
  8: 100k
  9: 50k
  10: 25k
&lt;/code&gt;&lt;/pre&gt;
And so on... after 20 years, probably 25 traders will have beaten the market for 20 years straight. Next year, same thing, 25 traders will have beaten the market, and so on. In the US, there&amp;#x27;s always someone who has beaten the market over the last few decades - there&amp;#x27;s nothing special about them. Randomly picking stocks would give you the same end result. But since we&amp;#x27;re storytellers, we build an explanation and go with it.</text></item><item><author>melling</author><text>For anyone interested in a great story about a world class mathematician who built a company that has used algorithms to beat the market for the last few decades, James Simons has an impressive record:&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.ted.com&amp;#x2F;talks&amp;#x2F;jim_simons_a_rare_interview_with_the_mathematician_who_cracked_wall_street?language=en&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.ted.com&amp;#x2F;talks&amp;#x2F;jim_simons_a_rare_interview_with_t...&lt;/a&gt;&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;m.youtube.com&amp;#x2F;watch?v=QNznD9hMEh0&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;m.youtube.com&amp;#x2F;watch?v=QNznD9hMEh0&lt;/a&gt;&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;en.m.wikipedia.org&amp;#x2F;wiki&amp;#x2F;Jim_Simons_(mathematician)&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;en.m.wikipedia.org&amp;#x2F;wiki&amp;#x2F;Jim_Simons_(mathematician)&lt;/a&gt;&lt;p&gt;One other thing, the Simons Foundation funds Quanta Magazine, whose articles frequently appear on HN:&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.quantamagazine.org&amp;#x2F;&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.quantamagazine.org&amp;#x2F;&lt;/a&gt;</text></item></parent_chain><comment><author>downandout</author><text>The math, at least when it comes to the Medallion Fund, says that you are wrong.  The odds of being able to achieve 40%+ returns (net of very steep fees) over 20+ years are astronomically low.  In fact, the odds of simply being in the top 25% of hedge funds for 20 straight years, through “randomly picking stocks” as you put it, are 1&amp;#x2F;(4^20), which is roughly 1.09 in 1 trillion.  There have been less than 25,000 hedge funds in US history.&lt;p&gt;Yours is the kind of folksy explanation that appeals to the masses.  It seems like the kind of thing Bernie Sanders would say in a speech.  But in this case it leads to an astoundingly inaccurate conclusion.</text></comment>
<story><title>Day Trading for a Living?</title><url>https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3423101</url></story><parent_chain><item><author>inerte</author><text>Someone will always beat the market, because that&amp;#x27;s what we&amp;#x27;re looking for.&lt;p&gt;I think it was on &amp;quot;Thinking Fast and Slow&amp;quot; that I read it&amp;#x27;s pointless to analyze the stock market winners, since it&amp;#x27;s a random process. Imagine there are 30 million entities that own stocks in the US - individual, companies, funds, etc... If on a given year half of them did better than average (with some rounding liberty):&lt;p&gt;&lt;pre&gt;&lt;code&gt;  1st year: 15M better than average
  2nd year: 7.5M better than average
  3: 3.25M
  4: 1.6M
  5: 800k
  6: 400k
  7: 200k
  8: 100k
  9: 50k
  10: 25k
&lt;/code&gt;&lt;/pre&gt;
And so on... after 20 years, probably 25 traders will have beaten the market for 20 years straight. Next year, same thing, 25 traders will have beaten the market, and so on. In the US, there&amp;#x27;s always someone who has beaten the market over the last few decades - there&amp;#x27;s nothing special about them. Randomly picking stocks would give you the same end result. But since we&amp;#x27;re storytellers, we build an explanation and go with it.</text></item><item><author>melling</author><text>For anyone interested in a great story about a world class mathematician who built a company that has used algorithms to beat the market for the last few decades, James Simons has an impressive record:&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.ted.com&amp;#x2F;talks&amp;#x2F;jim_simons_a_rare_interview_with_the_mathematician_who_cracked_wall_street?language=en&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.ted.com&amp;#x2F;talks&amp;#x2F;jim_simons_a_rare_interview_with_t...&lt;/a&gt;&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;m.youtube.com&amp;#x2F;watch?v=QNznD9hMEh0&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;m.youtube.com&amp;#x2F;watch?v=QNznD9hMEh0&lt;/a&gt;&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;en.m.wikipedia.org&amp;#x2F;wiki&amp;#x2F;Jim_Simons_(mathematician)&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;en.m.wikipedia.org&amp;#x2F;wiki&amp;#x2F;Jim_Simons_(mathematician)&lt;/a&gt;&lt;p&gt;One other thing, the Simons Foundation funds Quanta Magazine, whose articles frequently appear on HN:&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.quantamagazine.org&amp;#x2F;&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.quantamagazine.org&amp;#x2F;&lt;/a&gt;</text></item></parent_chain><comment><author>kolbe</author><text>If you think everything is just random, you should educate yourself the impact of superior information sources or technology on producing returns. Are you telling me someone who runs the fastest market data feed between Chicago and New Jersey, doing arbitrages between S&amp;amp;P futures and S&amp;amp;P ETFs is just getting lucky over and over again, and it will eventually be revealed that they just won 30,000 coin tosses in a row?</text></comment>