From: gts (gts_2000@yahoo.com)
Date: Wed Jun 11 2003 - 19:04:15 MDT
Gary Miller wrote:
> This system claims to have averaged 17.7% annual return since 1973.
I don't doubt it.
If you look at 100 randomly devised trading systems, about 50 of them will
have outperformed the market over a given time period. Among those 50 that
outperformed, one will have returned something like 17.7% annually. That
doesn't it make it any less random than the other 99 systems.
The same kind of analysis applies to mutual funds. Some funds have shown
superior returns over long periods. However statistical analysis shows that
funds that outperform on a risk-adjusted basis in year 1 are no more likely
to outperform in year 2 than funds that underperformed in year 1.
Furthermore, approximately 3/4 of mutual funds underperform the S+P 500 each
year. These funds are managed by the top guns of the industry, yet on
average they can't beat the market after transaction costs.
Market skill is a myth.
-gts
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