The no-free lunch theorem is fascinating, and basically says "you have to work to get results" https://en.wikipedia.org/wiki/No_free_lunch_theorem
Apply it to markets and returns from momentum funds (as an optimisation process) you can see why people who invest their life into these strategies will struggle in the long term, as the Law of Large Numbers https://en.wikipedia.org/wiki/Law_of_large_numbers kicks in. The question is, how long do they have?
NB: you can spot a free-lunch theorem issue by asking "what work has to be done?" and "how much does that work cost me?". If the cost is zero, the risk is high. If the cost is high, the risk should be low.
ed
npub14n…3kacs
2024-09-17 10:49:13
Author Public Key
npub14nug5qcgz4karvleme6h87yd6q7755f2lt06x7krt08kdyrdt4xqk3kacsPublished at
2024-09-17 10:49:13Event JSON
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"content": "The no-free lunch theorem is fascinating, and basically says \"you have to work to get results\" https://en.wikipedia.org/wiki/No_free_lunch_theorem\n\nApply it to markets and returns from momentum funds (as an optimisation process) you can see why people who invest their life into these strategies will struggle in the long term, as the Law of Large Numbers https://en.wikipedia.org/wiki/Law_of_large_numbers kicks in. The question is, how long do they have?\n\nNB: you can spot a free-lunch theorem issue by asking \"what work has to be done?\" and \"how much does that work cost me?\". If the cost is zero, the risk is high. If the cost is high, the risk should be low.",
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