98% of investors and traders are morons who beg to be screwed by managers or brokers. I was in talks with over 10 brokers regarding distribution of my strategies to their clients. The strategies make new equity highs each quarter for the last 9+ years. The brokers never showed them to clients. Why? Not enough trade frequency = not that much commissions. And of course, clients think brokers are experts who want to help them in trading. Same with real estate agents. Buyers think they are experts... Whole nations will be slaughtered financially, according to their own choices and unimaginable lack of imagination and common sense.
The more abstruse the model the more it's merely self-referencing abstraction that doesn't supervene on reality. Fund managers are highly intelligent but deluded.
Here's your answer. Having a job = smart => Doing things that make you keep your job = smart thus if using CAPM = keep your job = smart using CAPM = smart The idiots are those who buy funds who use CAPM.
Fund managers are smart. But I think they are highly constrained in what they do. Additionally, their primary goal being to accumulate assets means that investmtent decisions are only partially made on financial risk/reward but also on "looking good" for the marketing team. Beating the index is hard because the index doesn't pay fees, commissions, or taxes. The index also doesn't have to keep cash on hand to satisfy redemptions (through the normal course of business). And things are made worse for them as hedgefunds and high frequency traders take advantage of their constraints. Mutual fund managers aren't dumb, but the mutual fund investment model is broken.
Mutual fund managers are not in the business of maximizing sustainable compounded returns. Mutual fund managers are in the business of raising and retaining assets, charging fees, and staying compliant with a tsunami of suffocating regulations.
Great Jeopardy question. I'll try "Mutual Fund managers are Idiots" for $500 Alex. "In finance, the capital asset pricing model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well-diversified portfolio, given that asset's non-diversifiable risk. The model takes into account the asset's sensitivity to non-diversifiable risk (also known as systematic risk or market risk), often represented by the quantity beta (β in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset." Ehhhhhhh (Buzzer sound). What is a "correction"?
Fully agree. Imagine there are millions of sheeple happy to be customers of such "business" sheeple pay hard earned cash so funds can stay compliant, maintain offices in the most expensive and prestigous locations and employ specialists who are experts in marketing and fee collection. same with organized religion. poor souls pay, so priests can live stress free in the most pricey locations and rape kids brains (if only) :eek:
Until the invention of broad market ETFs, people didn't have any other way to invest in the market. Most don't have the time, inclination, or ability to do it themselves. So you pay 1% to have someone do it for you and get you close to the market. And you know that you didn't give your money to Bernie Madoff. With improved market access and ETF's, they are less relevant now (except in fixed income markets).
No. Most of the real investment management houses that manage significant money consist of smart people doing what they say they will. Asset management is different than trading is different than banking. ...there are obviously some who don't know what they're doing, but that's no different than any other industry. -m2c