In a recent post, I mentioned the research of Henrik Bessembinder who investigates the extreme outliers in the US stock market, i.e. the 200 best and worst stocks by 10-year performance. Obviously, we all would love to find the next Amazon before it becomes the next Amazon, but we all know that this is nigh impossible. Or is it?
When I got to "the characteristics he investigated only explained about 2% of the cross-section of returns over the subsequent decade" it kind of defeated the entire study. No?
I chuckled a bit at the idea of drawdowns being a force for good. In researching Operations Research in WWII I found that particular root of the 'quant' discipline was not JUST numbers-based. A dose of explanation, even an appeal to 'common sense', was called forth. This gentleman's research was rigorously numeric, I see.
When I got to "the characteristics he investigated only explained about 2% of the cross-section of returns over the subsequent decade" it kind of defeated the entire study. No?
I chuckled a bit at the idea of drawdowns being a force for good. In researching Operations Research in WWII I found that particular root of the 'quant' discipline was not JUST numbers-based. A dose of explanation, even an appeal to 'common sense', was called forth. This gentleman's research was rigorously numeric, I see.