waveman comments on Markets are Anti-Inductive - Less Wrong

30 Post author: Eliezer_Yudkowsky 26 February 2009 12:55AM

You are viewing a comment permalink. View the original post to see all comments and the full post content.

Comments (56)

Sort By: Old

You are viewing a single comment's thread. Show more comments above.

Comment author: waveman 15 March 2011 10:07:51AM 5 points [-]

There are some pretty smart traders. But there is also a lot of dumb money.

The classic example of this was Peter Lynch, a legendary stock trader. His fund ( Magellan) outperformed the market greatly, especially in the early years. But if you weight his returns by the capital in his fund, it actually underperformed.

What this means is that the investors in his fund managed to more than completely negate his stock-picking skill by adversely timing their entries and exits from his fund. Amazing!