[smabie]

The low beta anomaly has persisted for since we have data. If you consider the S&P 500 the market, then yes, it's not difficult to beat it by investing in low beta stocks and leveraging up so your beta is 1. This is a classic and time-tested strategy that will probably always outperform, on a risk-adjusted basis.

[roenxi]

You're arguing on HN that you have a long-term strategy that can reliably beat the market. Such a strategy would be worth billions of dollars. You probably don't have such a strategy.

Good luck with that though.

[smabie]

There are a number of persistent factors. They are well known in academia and to financial practitioners. There are structural reasons for their existence. We are talking about value, fama french size, etc. These are classic factors that everyone knows about.

https://www.aqr.com/Insights/Research/Journal-Article/Bettin...

https://en.wikipedia.org/wiki/Low-volatility_anomaly

I think your attitude of dismissing decades of academic research by Nobel prize winners is a little myopic.

Also I don't think you understand what "risk-adjusted" means.

[roenxi]

> Also I don't think you understand what "risk-adjusted" means.

You might be right; why don't you try explaining it for me? I suspect it is going to look a lot like a justification for why your strategy is fantastic even though it makes sub-par returns.

[smabie]

Hey, maybe if I was a little rude. I'm sorry. The fundamentals of quant finance are little too long to go into here. But if you're legitimately interested in having a good conversation. I can explain it to you. Email me at [e-mail].

I can give you complete run down of persistent factors, leverage, risk-adjusted returns, etc etc.

[hackernewsn00b]

You should take a beat and search the keywords, "trading capacity constraint."

That will lead you to the reasons why it is very possible to both beat the market and be incapable of scaling it up to billions of dollars.

tl;dr: Someone who has found a way to reliably arbitrage to 25% gains year over year on an inefficiency that will only fill about $100,000 is not going to be able to cash their system in for billions of dollars. But they will be reliably beating the market (on a risk-adjusted basis: assuming the system has risk equal to or less than holding e.g. the S&P).

You will find that firms which can actually reliably beat the market do tend to make their founders wealthy. But they can't scale it beyond the capacity allowed for by the inefficiency. All successful hedge funds and prop shops eventually reach a point where they can't reinvest the returns for the same gain.

[svara]

That kind of sounds to good to be true... This [0] seems to suggest that the low-beta anomaly is essentially an artifact of how risk is measured. Toughts?

[0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2503174

[steephills]

Pics or it didn't happen! We should not fall below wallstreetbets standards on HN.