throwawaymath

This is a naive way of doing the analysis, because we have examples of funds whose performance is so many standard deviations beyond the mean that we wouldn't expect them to arise by chance even if every single business in the United States was a professional trading firm. To get you started, I invite you to consider Renaissance Technologies, as one example. [1]

We'll assume that trading returns have a binary distribution. Traders win or lose with equal probability. This is not a great model, but it's good for making ballpark estimates, because it overestimates the odds of a track record like Renaissances.

RenTec's Medallion fund has not had a down year in the past 25. The odds of this are at most 1 in 33 million, using our binary model. Survivorship bias does not begin to explain this; there have not been anything resembling 33 million hedge funds over the course of history. I think 30000 hedge funds is a fairly generous estimate. [2]

In order to account for Renaissance's 30 year record of 70% returns before fees (and 40% after fees) under your hypothesis, we need to advance the claim that Renaissance has been successfully conducting massive fraud and financial conspiracy with a resulting profit north of over one hundred billion dollars over three decades. Even the common citation of the IRS case with the Deutsche basket options doesn't even begin to control for those kinds of returns; there would have to be something fundamentally novel criminal conspiracy occurring in Long Island.

Of course, you can still try to defend that position. But it makes the claim significantly more complex than simply saying, "most managers don't beat the market."

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1. There are others. TGS, Baupost, etc.

2. This is copied from one of my favorite rebuttals of this point: https://news.ycombinator.com/item?id=9860254

But in the abstract, you differentiate them the same way you implement any hypothetical distinguisher in probability theory. Consider an n-sigma event observed to occur consistently. As n increases the likelihood of the event occurring by chance (rather than agency) decreases.

From what I've seen on HN, this quote is one of the top offenders when it comes to commenters just dropping it in without further engagement. On well-moderated subreddits like /r/askhistorians, commenters are required to critically engage with their citations instead of just linking them. Likewise I feel we should put a moratorium on responding exclusively with (well worn) quotations on HN.

To be specific: the way you've responded here is trite, dismissive of someone else's perspective by way of judging them for their occupation, and generally lacking in nuance. It's middle brow posturing of insight without the substantive analysis to back it up.

What have we learned as a result of this solemn reminder that some people get paid to do things we disagree with? People are explicitly calling out their affiliations with adtech in this thread; should we abandon discussion with them because you think their paycheck precludes them from being able to be persuaded?

Here's a riposte for you: "The mark of an educated mind is the ability to entertain an idea without accepting it."

The EMH doesn't even preclude the possibility of consistently beating the market (consistently mining alpha); it simply states that the cost of providing those investments as a service rationally rises to cannibalize the outsized returns, so it becomes a wash.

We see this in practice: the well known hedge funds which demonstrate consistent alpha eventually close their doors to outside investors. Why pool risk with external capital when you're printing money? Investors are a hassle and no strategy can scale infinitely. When you can consistently mine alpha it's strictly better to just become a prop shop and run on your own money.

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> Shame on you and your ilk for suggesting Descartes, Newton, Kant etc. were just there picking low hanging fruit. They were doing work no one had the courage to do.

There's a lot of passion in your comment, but it's also really antagonistic. The person you replied to was very respectful and cogent in expressing their point of view; you abandoned that civility quite quickly - and for what?

If you're as well read as your references imply, surely you can appreciate an argument which casts aspersion on the "lone hero" ideation of historical progress.

What if the forecast is Bayesian rather than frequentist?

Can anyone explain how they're achieving comparable performance to C++ using Go, for someone who has never programmed in Go?

Denise is great, but I wouldn't say she's the best source to answer harmless but very important questions prospective Java programmers might have that you can answer, for example :)

Here's an example question for you: do you want candidates to also have tax and accounting experience, or is deep Java/Kotlin enough?

Something to consider.

How would you stop investors in your two public funds (and their accountants) from asking pointed questions about disbursements from one fund to the others? Do you plan to fool them for this amount of time, or bring them into the conspiracy?

And how will you sustain the conspiracy when your other two funds trail the market index by a lower combined differential than your other, internal fund is beating the index? Will you initiate a Ponzi, or something else?

There is a more realistic angle to attribute RenTech's returns to fraud. I don't personally believe it as I have friends there, but I believe it would technically work:

A nontrivial number of RenTech's employees have come from the intelligence apparatus of the United States; namely the NSA. Simons was particularly affiliated with them early on in his math career. It strikes me as plausible (but again, highly unlikely) that if RenTech is is a conspiracy, it is a conspiracy sponsored by US intelligence. They would have the capability to run a 30 year secretive conspiracy, and they would have they desire to attract top talent in math, physics and computer science.

But I'm just speculating for fun year. I really don't think there's any conspiracy :)

In particular: RenTech likes to keep a handle on this publicity for the purposes of courting extremely good talent from academia and industry. That's the only reason the Medallion returns are ever intentionally publicized. Anyone investing in RenTech's other funds knows full well they're not getting the alpha powering Medallion's returns.

Simons would probably have preferred to stay entirely under the radar, but the cat's out of the bag already and has been for decades. The most successful hedge funds (like the Princeton Alpha offshoots) don't court publicity because they don't need to pool risk with outside investors. They're not even hedge funds in the common sense of the term; they're proprietary trading firms run on employee and partner capital. Medallion can be thought of a prop shop within a hedge fund in that way.

More to your specific example, I've also worked with the alternative data you're talking about and it doesn't offer automated inference generation. You implicitly have a hypothesis (or several) in mind when you're working with things like credit card transaction data from Yodlee or Second Measure.

Automation is a continuum. What you're talking about is automating time series analysis. I never said you can't do that.

1) Those tax advantages can only improve returns which are already fundamentally strong, and

2) There is no "smoothing" effect achieved; the options baskets do not defer returns for years at a time.

I get that the cynical take is, as ever, the attractive one on Hacker News. But speaking frankly, what you're saying doesn't actually make sense. Among other problems with your explanation, there's a straightforward wrinkle. While it's not available to the general public, other institutions like Bloomberg and WSJ have had (and still have) access to audited attestations of Medallion's track record over a timespan of 25 years.

Likewise, search Google Scholar for "@rentec.com", or "Renaissance Technologies."

Renaissance has always put massive personnel and technology investment into its data processing and analysis pipeline. But there is no "automatic inference" generation. It's not so much brute forcing alpha as it is streamlining the process of hypothesis testing for research scientists so that strategies can be very rapidly generated and examined.

Automatic inferences would be susceptible to two major risks. First, you'd run into spurious correlations at the dimensionality of data we're talking about. Those spurious signals would have to be pruned, significantly reducing any advantage.

Second, you'd decouple the strategy generation from financial domain expertise. The strategies are not developed in a vacuum - contrary to popular belief, quant trading firms do apply financial acumen.

Of the people I know who work at (or used to work at) RenTech, one actually joined after working at the NSA. His PhD thesis was a joint collaboration between Harvard's physics department and the NSA.

And as far as billionaires go, I don't even think Simons gets enough press to really make a distinction on whether or not it's overly positive. Someone else mentioned Gates, which is I think apt. He has cultivated a savior mythos in the press in which he eradicates diseases using his fortune.

Even if you include everything the Simons Foundation does for disease and health research, it's just a drop in the bucket compared to how much positive spin lots of other billionaires get. Off the top of my head, I think even David E. Shaw gets more spotlight than Simons through DESRES and his whole "spurned academic turned superstar" schtick.

1 = (1, 0)

i = (0, 1)

2 + 3i = (2, 3)

and so on.

EDIT: To make my position clear, what I am saying is this:

1. The presented algorithm will have variable computation time, but not variable asymptotic time,

2. The algorithm uses O(1) (i.e. constant time) polynomial multiplications in the worst case, and

3. The worst case bound does not change with n nor c, though they are used in the algorithm to calibrate the divsteps such that no more than O(1) operations are required.

I will concede it's possible I'm misunderstanding the paper itself, but I don't see that here.