[dharmon]

I think you should really think about the old joke: "Two economists were walking down the street. One looked down and said, 'look, there's a $20 bill on the sidewalk!' The other, without even looking down said, 'No way, if there were, someone else would have already picked it up'"

RenTec has been successful for decades, but the are regularly shifting strategies as the $20 bills are "picked up" by the market.

A sibling post asked you which variant of EMH you are "convicted" about. You should know that if it is strong or semi-strong, you have a conviction about the financial equivalent of tequila being good for teething babies or using leeches to bleed out various diseases. And the weak form is so useless I am not sure it really qualifies as a hypothesis.

You will have to search out the old fogies in economics depts to find the true EMH adherents. Even Fama professes it, but if you listen to the substance of his speech and read his papers, doesn't really seem to believe it. (maybe he thinks he'd have to return his Nobel prize if he denounced it?)

[QML]

So TL;DR the market isn’t as efficient as most would believe it is.

That makes sense since the market is ran by humans; but what if it was solely managed by a computer.

While reviewing for a final, I learned that computers are extremely fast at detecting negative cycles. An application of this? Arbitrage.

If you graph the foreign exchange market with each vertex being a currency and a directed edge being an exchange rate, applying the logarithm operator to each edge and then running a DFS transversal, it would be possible to find paths of arbitration.

[jdietrich]

What RenTec do is more akin to gold mining than finding $20 bills on the sidewalk. They expend substantial computational and intellectual resources in the pursuit of alpha. They're finding alpha in places that are non-obvious to the rest of the hedge fund industry, let alone the average investor. They're not eating a free lunch.