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Comment by washedup | Hacker News Reader

Well, in the article he said tat he did not care about direction, he would simple buy when his expected price was up, and sell when down. However, there could have easily been a bias in his model that "preferred" and performed better during upward movements. If so, he got lucky.

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Longs and shorts were 50/50 and my program showed no preference for up or down days. High volatility and high volume was what it liked.

I guess the real question is: what was your alpha in that timeframe?

I'm probably showing my ignorance here but what do you mean by alpha? And how is it quantified?

Alpha is how much excess return you had over the market (or risk free return(

E.g. if you made 10% when overall market was up 15% for the year, you have negative alpha. [As someone could have bought index and held it through year to generate better return]

If you made 20% when market was up 10%, you have positive alpha.

That is why everyone in the investment community is 'seeking alpha'.

You don't need a bias to accidentally make money when the market is overall moving up, do you? Picking stocks by throwing darts while blindfolded will, on average, make you money in a market that's moving up.

The problem is he was also selling short. If you pick stocks randomly and randomly pick to buy or sell you shouldn't make money, ever.

You're right, if you're randomly and without bias including short selling then you'd expect to neither make nor lose money, aside from transaction fees.

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