Following its first month of public trading, a new Derwent fund based on Twitter reported 1.85 percent return on investment. During this same time period, the S&P 500 index fell 2.2 percent, "and the average hedge fund made only 0.76 per cent."
An algorithm that outperforms the stock market for one month is not news. If they have an algorithm that can do it consistently over decades I'll be impressed.
Many funds have been trying to mine this sort of data, and presumably we don't hear about it when the results aren't so good, so this is just cherrypicking.
I can train ten chimps to pick stocks, and the best-performing of them over the first month will no doubt outperform the market significantly. But if I try to sell you my stock-picking chimp then beware.
Indeed, seems like the classic sharpshooter fallacy. Given the variability in the market there will always generally be some random betting strategy that's better than everything else within a short time period.
This reminds me of the movie Limitless, where the protagonist devised computer algorithms that would scan forums and other social media sites to get people's sentiments of what would happen to the stock, then successfully made 40x+ returns within months.
I'm sure that plenty of hedge funds were using these feeds (blogs, twitter, etc.) for years.
They just kept their mouth shut because it's foolish to broadcast that you have an edge on your competitors... I bet that since it's out in the open, it's now obsolete...
An algorithm that outperforms the stock market for one month is not news. If they have an algorithm that can do it consistently over decades I'll be impressed.
Many funds have been trying to mine this sort of data, and presumably we don't hear about it when the results aren't so good, so this is just cherrypicking.
I can train ten chimps to pick stocks, and the best-performing of them over the first month will no doubt outperform the market significantly. But if I try to sell you my stock-picking chimp then beware.