waveman comments on Markets are Anti-Inductive - Less Wrong
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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!