On: A Man Who Abandoned Value

[kgwgk]

But what matters is not the volatility of the market as much as the cross-sectional dispersion of stocks. If correlation was high and all the stocks hade beta one and were almost identical to the market there would be little opportunity for a stock-picking fund like this, whatever the volatility of the market.

[OJFord → kgwgk]

The market's only moved in one direction over the period; the fund can make money on moves in both directions.

So the more volatile (within a period) the more money making moves there.

If this is the benchmark:

     _   _/\  /
    / \_/   \/

at a dollar per slash, it's up $2. A fund that bet (and realised) a $1 per slash made $8.

(Even with only long bets, they could make $5.)

[kgwgk → OJFord]

The market has moved a lot. But the point is that if the fund goes 100% TSLA at the beginning and does nothing else it would have outperformed massively and the volatility of the market would be completely irrelevant.

[OJFord → kgwgk]

What point is that? You're moving the goalposts, why would/should/do you think this fund did go '100% TSLA at the beginning and [do] nothinig else'?

[kgwgk → OJFord]

That seems closer to what they did than timing the market, don't you think?

My point was that to "test" if a concentrated stock-picking fund can get that result by luck you don't look at how often the market with such and such return and volatility gets that performance or how often randomly trading the market would you get this performance.

You look at how rare is it that a concentrated portfolio of random stocks has a very good performance. The answer is "not that much".