[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.