Now that quants have discovered them and attempted to profit from them, there’s a risk that those effects will be arbitraged away. But the sheer durability of the factors does imply there is something to factor investing.
Can someone who has made money in finance or knows how it works, explain how/why short term gain/loss doesn't translate into long term gain/loss?
It seems like if there was any signal left above the noise, that trading bots would exploit it. But that's obviously not the case, because I could hop on Robinhood today and make a quick 2% riding the daily heartbeat of the stock. My last experience with this was 18 years ago with my dad where we day traded Apple and got up about 40% or $40,000 over 4 months between the dot bomb and 9/11 (which lead to subsequently wiped out all our gains in a week). If things have changed so much that this is no longer possible, then I apologize. But the article suggests that finding correlations still works.
I fundamentally don't understand how people on Wall Street can make hundreds of thousands of dollars per year investing (with other people's money, I guess?), but meanwhile the average return of the stock market is only 10% per year.
What I'm getting at is that either:
1) there is predictability in investing (meaning that we could all profit if we just had the money to trade, which is inherently discriminatory against the poor)
or:
2) there is no predictability in investing (meaning that it is gambling and should perhaps be regulated or banned as such)
I'm getting the feeling that all of this has fingers in issues like wealth inequality and generational wealth. Perhaps this is simply a "because that's the way it is" situation, but that was said about stuff like slavery and child marriage.