"Work" is one of those words. Certainly, there are automated systems that have "worked" for a while, maybe even a long while. But after several decades in the trading business, my belief is that automated systems don't "work" in the long run. The markets always change. And therefore, in order for a system to "work", it must be changed, and therefore, by definition, they don't "work". Anyone who believes automated systems "work" in the long run, I got a bridge to sell you. OldTrader
a mechanical system based on value investing principles does work on the long-run. using a set of book value price earnings rules can and does produces returns overtime and thats pretty unlikely to change
The only thing that is constant in life, is change. System traders are constantly looking for edges. Some edges go away, new ones appear, and some even reappear. As to your other comment, there are automated or semi-automated strategies that have worked for many many years. One day they may stop working. The greater the barrier to entry, the longer they are likely to work. But you know, if you can get a hold of one very good strategy for three or four years, and make $50,000,000, I doubt you will care how long it worked for. I have worked for several prop firms or boutique firms that are banging out profits like this for years, and continue to do so on basically the same strategy or extensions thereof. Examples of publicly sucessful quant firms are Rentec, that have traded the same Basic strategy for 10+ years. Even on this site, Don Bright has posted a strategy that has worked for him and his traders for nearly 20 years, and that is after it has been copied by hundreds of other traders. nitro
1. The implications of a guy with 200m or some guy with 4m blowing up - regardless of what university degrees they may have - is ZERO. People blow up all the time and the show will go on. 2. Yes, there are automated strategies traded successfully with billions of dollars. Of course, they are being refined all the time. MAN AHL Diversified: Annualised volatility 18.0% Worst drawdown -17.9% Compound annual rate of return 19.5% Total return (Since inception) 724.5% AUM $3 bln USD
the problem with book value is the stated book value is often very inaccurate, i.e. it has been marked-to-model rather than marked-to-market
"And therefore, in order for a system to "work", it must be changed, and therefore, by definition, they don't "work". " A very good and practical point indeed. I totally agree.