From what I understand, that fund still does huge gains, and can't get too big.
[0] https://www.reuters.com/business/finance/renaissance-executi...
Here's the thing...if you want to be pedantic, you need to explain how someone persists such alpha over time with examples. Not easy.
edit: See my note below on RenTech.
Someone like Warren Buffet has a once in a generation skill combined with massive scale and information advantage (he sees deals in publicly-traded stocks before anyone else). You may claim that it’s not fair to cite Buffet here, but he’s just the most public example of market actors with a durable advantage.
> I did the math and starting from 1965 to 2002, a period of 38 years, the compounded annual return of the S&P 500 was 10.02% while that of Berkshire was 25.66%. But—and here's the kicker—from 2003 to 2022, a period of 20 years, the S&P 500 delivered a 9.80% compounded annual return while Berkshire came in lower at 9.75%. [0]
He's gotten fined for insider dealing by the SEC. And I figure that a lot of his "alpha" came in the earlier days of the markets when there was less regulation.
FWIW, here's an interesting article on Buffett's alpha. [1]
> Previous researchers analyzing Buffett’s returns using conventional size, value, and momentum factors haven’t been able to adequately explain his outperformance, the authors say, leaving admirers to conclude that Buffett’s magic is pure alpha. So they extend the analysis by testing Buffett’s impressive returns — as measured by Berkshire’s stock — against two factors that better reflect his folksy investing wisdom: One called “Betting Against Beta,” which represents safe, low-beta stocks, and another called “Quality Minus Junk,” which represents the stocks of high-quality companies that are profitable, growing, and paying dividends.
The results? “Controlling for these factors,” the authors write, “drives the alpha of Berkshire’s public stock portfolio down to a statistically insignificant annualized 0.1%, meaning that these factors almost completely explain the performance of Buffett’s public portfolio.” The factors also explain “a large part” of Berkshire’s overall stock return, the authors add, as well as Berkshire’s private portfolio, insofar as their alphas also become statistically insignificant.
[0] https://www.linkedin.com/pulse/warren-buffett-has-underperfo...
[1] https://blogs.cfainstitute.org/investor/2012/09/11/chasing-w...
Note: There's a great podcast on RenTech by Acquired: https://www.acquired.fm/episodes/renaissance-technologies
They lost money for a long time, and it was not easy building what they built. I really enjoyed the early parts where they were solving problems in creative ways like any startup. For example, they needed data so had people calling them each day reading off numbers and someone writing them to down to enter them later.
How the later part of the story ties to today's politics is also interesting.
My basic strategy is that the signal/news/data contains no real information beyond whether or not people are buying or selling. When they stop selling I start buying and vice versa. Use your data skills to identify "things that work with regularity" and "things that rarely ever work" while at the same time understanding "literally any strategy works SOMETIMES".
Develop a roughly asymmetric strategy where your average gain is greater than your average loss per trade. The biggest thing you need is to pick some BIG WIN trades and ride them for a large profit. A small percentage of big wins pay for the losers and make the whole thing profitable. Remember that you "Make more money" by trading larger quantities, not by seeking larger moves. You don't "make money" so much as you harvest what the market gives you and if its not giving you close the trade. Your chosen trading system should reflect this.
Size your trades such that if you're betting N shares with $Y dollars now and you take a loss, you're coming back to the table with at least N shares and $Y dollars. Never loose $100 and find yourself in the position of recovering that loss with only $50 to play with. Read about "money management" in gambling for some ideas heres.
Don't be afraid of the short side either as you will make about half your money there. Don't be afraid to bet agains the trend and "call bullshit" on a move - your system should be designed to detect the success rates of these calls and should be looking for those situations.
For me its about using data to make bets where, in the event I win, I win pretty big and in the event I lose, I lose minimally.
USE BRACKET ORDERS FOR ALL POSITIONS OR PERISH. AUTOMATE YOUR STRATEGY OR PERISH. ALWAYS TAKE YOUR TRADES OR PERISH.
Making profitable trades here and there is EASY - keeping the money you made on those is the hard part.
EDIT: If you're concerned about "slippage" you have a bad strategy. If the strategy can be undone by a .75pt slip then you need to consider something else.
EDIT: Don't be seduced by the High Frequency Trading bullshit. You don't have the infrastructure for this and the fastest safest Rust code you can write is still connected to some slow retail trading infra here. Plenty of money to be made in Low Freq mode. 20 trades a month per instrument is a lot of trades a month!
Historic evidence does not support this statement in the strong sense. Whether it is true, in a weak sense, into the future, is debatable.