Re:One of Wall Street’s Most Popular Trading Strategies Is N...
by simonh on Sunday March 03, 2019 @03:47AM
(#19293460)
I think both can be true, depending on the details of the strategy and the conditions in which it’s valid.
Sometimes common knowledge of a strategy can lead to the elimination of the situation in which it works. Participants can anticipate it and so the conditions no longer occur.
In other cases so many participants pike into the strategy, in which there is only so much money to be made, that returns get so thin that only the very most efficient and smart participants can get anything out if it. Arbitrage is a good example, once its known it can get traded out of the market very rapidly.
Sometimes common knowledge of a strategy can lead to the elimination of the situation in which it works. Participants can anticipate it and so the conditions no longer occur.
In other cases so many participants pike into the strategy, in which there is only so much money to be made, that returns get so thin that only the very most efficient and smart participants can get anything out if it. Arbitrage is a good example, once its known it can get traded out of the market very rapidly.