How about you go ahead and mock up a probability model about how a company like Jump Trading can make 100s of market neutral bets every day for ten years, and end up being lucky to make money on 95% of those days. The probability of that happening due to randomness around a 50% probability on each trade is probably lower than 1 in the number of atoms in the universe.
Pull up Goldman Sachs, go to page 95ish:
https://www.goldmansachs.com/investor-relations/financials/c... (p. 95)
https://www.goldmansachs.com/investor-relations/financials/c... (p. 94)
look at the distribution chart. That's days where rev was positive vs. days not.
In the video they covered 2014/2015/2016 which I why I went a looked at 2017/2018. They are right a LOT. And year over year.
I don't think it's magic. I think they are paying attention and using information to their advantage.
And it is a hypothesis that can't be disproven or proven, since, in a round-about way, it concerns non-computable concepts like Kolmogorov Complexity/Randomness (The efficient market hypothesis basically states that the stock market is an optimally compressed computer program, there are no discernible patterns left to reduce the "file" size).
There are numerous tried and tested ways to beat the market, including:
- Have more information than other players - Have better models than other players - Make faster decisions than other players - Have enough energy to perturb the system and predict the outcome (this is the big one that is out of reach of most individuals and non-Physics PhD's).
Survivor bias is of course a very real phenomenon, but like other incomplete information games that can be won, or even solved, algorithmically: Poker, international diplomacy, ..., we would not conflate pure luck with the real skills required to play those games consistently well.