Only a Market Crash Can Stop Warren Buffett From Winning This $1 Million Bet https://www.wsj.com/articles/only-a...tt-from-winning-this-1-million-bet-1487851203
It all depends on strategy-- and the rest of the ecosystem- most strats are automated today. Remember, we are not talking mom & pop when it comes to hedge fund investors. Some of these cats are in 100 plus funds. But yeah, trust is tougher with a part timer growing assets. surf
There was a Citigroup research paper a few years ago than an institutional fund can't survive on less than 300mm aum. I think most funds fail because they can never raise enough capital to set up the infrastructure required to manage institutional money.
Not sure that's true. Traders should focus on markets with largest inefficiencies. Risk premium can be fairly priced, in which case you are not producing any alpha. IMHO
They can be and usually are one and the same. Risk premia generates inefficiencies. For example, the put skew in the S&P 500 is a function of risk premia AND a market inefficiency. The puts are over valued by any statistical measure and the premia exists to attract liquidity and entice others to provide insurance to those looking to lay off risk at a price. An even better example are options in the electricity market. The upside call skews in PJM are VERY pronounced. Very few people want to sell them because of the risk but the premia is wide enough to provide an incentive to enter the market. But yes, risk premia "can" be fairly priced i.e implied vol on GOOGL options going into earnings.
I'm attaching a link and two pdfs on the subject matter. It's highly discussed in academia. Not saying there is an absolute right or wrong answer, but there is plenty of research to chew on. http://www.markhannam.com/preview/essays/essay2a.htm