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« VaR | Home | Is your Credit Department being asked to increase the degree of sophistication (e.g. - Value at Risk, PFE, etc) in any off the following areas? Check ALL that apply. »
Conv by: Nick Barcia
Icon-thread a reply to How Plentiful is Alpha?
by David Rowe - Sungard on Mar 16, 2007 - 12:13 PM read 362 times
Source: http://www4.sungard.com/blogs/riskManagement/?p=5#comment-14 		External

It seems to me that while efficient markets would rule out the possibility of positive alpha, there are still several points that can be made. First, we have seen that markets are not always (maybe not ever, depending on who you ask) weakly efficient. That means that in the short term alpha can be positive. Second, while we are often talking about the market as a whole being efficient, that doesnt mean that sample portfolios (i.e., any hedge fund picked at random) cannot exhibit positive alpha in the short run (several years). If I were to create several thousand portfolios randomly, some would have results well above and some well below market average. That would not change the market average.


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