YouSaid · the spoken record

Michael Robbins

lines on the record: 95
first: 2023-07-13
most recent: 2023-07-13
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“There could be that, and there's a really good mechanism for that. It could be something less mechanistic, like balancing growth and value, right? And a lot of people want to say if value outperforms in this month or this quarter, then we'll sell some value and buy some growth, right? And we'll keep a diversified portfolio of value and growth or some concept like that. It may sound really great, but then you go and you do a backtest, you do a study, and you say, well, yeah, but it just sounds great. It isn't, right? So to actually research your strategies and know what really has worked is helpful.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think that the systemization of it helps people in a number of ways. One is to avoid those biases, which we all have. And what's really funny about the biases is you can know you have it and still not avoid it. There's been experiments. It's embarrassing how persistent they are. Another thing is to actually know what you're doing precisely. I talked to many professional investors who have a great idea and it sounds great and they invest in it because they believe in it but if you actually do a study even a simple study like a regression you can prove them wrong. You could say no it sounds great. It sounds like you're right, but you're not right. You're just not right.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Up for the most part, you can assume that the higher returns are more common than negative returns. But I don't know that that's a good long-term assumption. You mentioned Japan. We had a lost decade ourselves, which for some people may have seen like an eternity. If you're near retirement, 10 years of sideways or negative movement could really hurt your quality of living. So those assumptions depend on who you are and what markets you're investing in.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“It's a great point, and you're absolutely right in that, that at least historically, stock market returns are skewed upward and you have a drift. And so if you're investing in that way, you do have a bias towards higher positive returns and lower negative returns. But one thing I disagree with is the bell curve concept, right? Returns do have really long tails, and those tails can eat into your risk capital to the point where you are locked in and you don't have anything to invest anymore. You need that money to pay the rent, right? So if you're only playing with capital that you can afford to lose, maybe you can assume a bell curve and survive a long tail. And if you're only investing in, say, the stock market in the United States, which has been trending”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so if you, I think what you referenced, I think name is variance drag, where if you lose 10% of your portfolio, you have to make 11% to gain it back or a little bit over 11% to gain it back. And that is certainly mathematically true. But tell us about in... You know, there's a bell curve distribution of 1% return, 1% drawdown, 2% return, 2% drawdown, and that assumes that a 3% return is as likely as a 3% drawdown thinking, oh, if you're down 10%, you have to make 11% of get it back. But what if an 11% return is just as likely as a 10% drawdown? And actually the bell curve should be in price, not in percentage return. Just because things go up over time.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“The idea behind diversification and optimization for your portfolio is to avoid that very actively and to say even if I need money tomorrow, it'll be there. Not even waiting till I retire, just to assure that I won't be broke. So it's a very different way of investing. And a lot of people like this hypothetical 30-year-old may think they have a certain risk tolerance until they lose everything. And then suddenly they're not as risk-seeking as they thought. It happens all the time. And that's really why experience is important because some people don't know how to react until they actually live through it. Just thinking about it and talking about it isn't enough.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“So it's an alternative. Well, actually, it's very much related to diversification, except it's focused on maximizing terminal wealth instead of maximizing risk adjusted return. So if in your hypothetical where you have a 30-year-old person who wants to be rich and he doesn't really care what happens in the path between now and then, he might use something like Kelly sizing to say, I want to maximize my terminal wealth. I don't care if I make a million dollars and lose it the next day and as long as I have $10 million when I retire. That is one way of investing, but there is a very real risk of losing all your money at some point and never recovering. Statistically, you'll be better off, but in reality you might be broke.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“But the fact that it was a big event was not a surprise. Everybody knew it was going to happen. It was widely publicized. You could see people in the market putting on hedges, volatility changing, and you could have said, I want to de-risk around that event so I don't get hurt. I don't know what's going to happen. That's too hard to predict. But that something might happen. That's not so hard to predict. And so risk management in that sense, controlling your exposures, not being exposed to big events that you know are happening. Those things are manageable and they can make a big difference in your long-term return. One of the problems, for instance, with Kelly sizing is that you could just go broke and then you can't recover.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Well, sure. I mean, it's just math that if you lose a lot of money, it's really hard to make it back. It's a lot better not to have lost it in the first place. An example I bring up pretty frequently is with Brexit. That was a pretty big surprise.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Got it. So, stockpicking, very tough. So, yeah, where is the work rewarded the best? Let's start with what did you say that's not tax loss harvesting? Obviously, obviously that's important, but risk management. Like, tell us about how work can be rewarded there.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I wouldn't put it that way. I don't agree with him on that point in particular. I think stock picking is very hard and you should focus on where your work is rewarded, right? And there's a lot of ways to reward work in investing and avoiding stupid mistakes is a good way. Predicting risk is a lot easier than predicting return. So you could focus on that, on de-risking or putting risk on. You could work on your sizing. You could work on your diversification, on efficient management, tax loss harvesting, things like that. That work is rewarded. But picking stocks is just so hard that it's not rewarding for most people. But I wouldn't be a nihilist and say that the less work, the better.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Right, but the whole point of indexes is, you know, they're going to be five stocks in the index that are total winners, five stocks that are total losers, and then the 490 in between are going to be kind of middle of the pack. But those winners are going to get bigger and bigger in the index. And then so the index will do well over time. And if you invested in Japan, the Nike in 1991, your returns would be quite poor and you'd only be able to bring that up.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Definitely looking at history and looking at an index like the SP 500, you're right. But when you're talking about individual stocks, then you're less assured of your long-term terminal wealth. Then you really have to look at gambling theory, use, say, Kelly sizing, and treat it like you're at a blackjack table. And I'm not saying that in a derogatory way. If you're young and you could afford to gamble and maybe you'll get rich and maybe you'll just start over again and you're okay with that, that's fine. That's perfectly valid. Lots of people have become rich by doing things like that. But I wouldn't say that just because the S&P 500 has done really well in the past, it'll necessarily do really well in the future. Or that that applies to individual stock selection.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“I understand that for institutional investors, and that is in the title for your book, they have needs that they can't handle a 50% drawdown. So it might make sense for them to allocate to a tail risk fund or to invest in very uncorrelated things, stuff like that. But for someone who's 30 years old, they're going to be working for at least 30 more years and they're allocating to their 401k, you know, they're going to be peaks and valleys all along the way, but the best way to get the best return is just to invest in SP500 or a diversified global equity market and not to mess around with other types of stuff. Is that fair to say on a personal level if on a long-term basis you can handle the drawdowns? Is that fair to say?”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Well, yeah, I didn't mean passive investing in that sense. I meant passively as in not spending 20 hours a day looking at stock statistics and pouring over regulatory filings and things like that Yeah, not that definition. But it's just a very hard thing to do. It's much easier to focus on being efficient, being diversified, things like that. You can pick a lot of low-hanging fruit by doing that. In fact, a really great writer works for AQR, Dr. Ilmanen, wrote a few books about that, about how it's important to focus on the easier things to achieve and less so on these hard things like picking stocks. So unless you happen to be very special, I would advise against it.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Well, I don't remember the exact statistic, but I wouldn't be at all surprised. There's one caveat to that is there is a bias for professional investors to belong, especially if there are analysts working for big banks. So there is that, but it is very hard. And so for most people, it doesn't make sense. Now, I disagree with people who say nobody can do it. I'm sure there are people who are good at it, just not most people. And certainly not people with a limited amount of time and attention. And what you mentioned, which is very relevant, is a lot of professional stock pickers, very smart, very focused, well-resourced, and spending an order amount of time trying to be successful. So to try to do it passively doesn't seem like a tremendously good idea.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. And in terms of how many people use it, it's very popular. So it's a great product. It's just often misused. And people use it because it's difficult to create a product that mimics volatility. There are volatility swaps. There are other things you can use, but they're expensive or they're difficult. It's similar with cryptocurrencies, right? kind of awkward to trade in the underlier so lots of people want other instruments to use and then there are huge divergences like the grayscale bitcoin trust versus the underlier right the carry is crazy and people want it though because it's so much more convenient than the underlier the same thing is true with volatility this is a great indicator it's a great thing to use in your rules and your strategy But to actually use volatility as an investable instrument is problematic.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Well, it's tricky. The VIX is a really attractive indicator, and that's why the VXX product is one of the most profitable products.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Often the VIX term structure is upward sloping and contango, meaning you're always going to have to sell something that's cheaper to buy something that's more expensive. So you're always running uphill and that you kind of be ground away. So why might it make sense for investors to traffic in these VIX products or VIX futures? I mean, if they're just doing it themselves, it's a similar thing to have that negative correlation. I mean, does their usage actually enhance returns in some way?”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“There was a clause in there that a lot of people didn't bother to read, and they assumed those AT-1s were like other AT1s, and they weren't. And it was all right there in the documents. It's all in the structure. And so when you deal in structured assets, you really should pay attention to the details.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“The VXX ETF is because of the rebalancing that it uses. So a lot of these highly structured products like the CTF try to mimic something else, in this case the VIX. And it does pretty well between open and close. But at the end of the day, it needs to rebalance. And that rebalancing almost invariably loses money. And so if you hold that asset for more than a day, certainly for a long period of time, you're almost guaranteed to lose money because of the mechanism in the product. And I think that's the essence behind that. If you're going to trade something complex, you really need to understand the mechanics. And that came up pretty notably in the AT1 bonds with Credit Suisse a month ago or a month and a half ago.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, and that's another really important point is that you've got to design your strategy based on how much skill you have. If you work at a small investment revisor and you can't hire really expensive analysts, then don't try to pick stocks, right? And in that case, a market with, I mean, a large portfolio with really diversified assets is helpful, right? Because you can benefit from that diversification. But if you're a really great stock picker and your value, your skill is in picking stocks, you don't want a diversified portfolio. You want a highly concentrated portfolio of just the stocks that you think are going to go up. So diversification isn't for everybody, but it is for most of us and probably most of your listeners and watchers. In terms of the VIX, that's a wholly different thing. The reason why VIX doesn't work.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Sorry, just on the diversification, instead of owning one stock, you can own 50 stocks or 500 stocks in the S&P 500, but don't you get to a point where to buy an asset that has a very low correlation or even negatively correlated at some point you're going to start sacrificing absolute returns, right? Like that absolute returns of VIX products are very are negative”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Oh, well, this isn't a stock picker's market, right? It doesn't matter how skillful you are, you really can't use that skill. So that's one source of the correlation, a use for the correlation. Another is to diversify your portfolio, which famously was supposedly said that it's the only free lunch in investing, that everything else requires skill and luck, but diversification can provide benefits just through the mechanics of it. And so that's another really great use for a market with uncorrelated assets.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“So there's a couple of points in what you said. And in general, Lack of correlation is great for two things. And so if you remember Grinold and Khan's fundamental law of active management, they say that success in active management is based on a few things. There's how efficient you are, how well you trade, what your skill is, and basically your investment universe, how many things you have to choose from. the correlation between those things because if the things are the same it doesn't matter if you have 100 of the same thing you might as well have one right so having uncorrelated assets to choose from lets you apply your skill and choose the ones that are going to versus the ones that go down there's a measure called pairwise correlation that people use say on the S&P 500 or the Russell 2000 and if the stocks are really correlated to each other”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Talk about VIX products such as VXX and ETF that owns the VIX that you talk about owns VIX features you talked about in the book and how look if you bought just S&P 500 and then you bought this thing and you never sold you'd be down almost 100% on those VIX products so you have to do something some sort of rebalancing in order to get some advantage so can you just walk us through the advantage of those negatively correlated products And then I want to sort of raise a kind of counterpoint, but yeah.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. It all depends on your timeframe. A friend of mine, Michael Lipkin, wrote a paper about that, how different people can make money on the same trade going in opposite directions as long as their investment horizon is different. So if you're trading pairs and you're a high frequency trader, you don't even care that they're banking stocks. You just care that they're co-integrated for a very short period of time or something like that. If you're a long-term investor, maybe you don't even care about the co-integration you just care about they're both bank stocks and they're both doing pretty well and they're, you know, they're both too large to fail. If you're thinking about a trade that lasts a few days or maybe even a few weeks, then a lot of luck and a lot of randomness can come to play. And I think that's the difference between being successful in these trades and”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“So in the 1990s, that basis trade, that's a pretty precise mechanical thing. You're shorting a five-year future and you're buying a five-year cash bond. They should be the same thing and you're harvesting that premium. Yes, the discrepancy can widen and you've got that risk of the repo rates, but you're kind of, you know, going. I feel like when you wander away from the world of bonds, the correlations, the tails, they can get very uncorrelated on the tails, right?”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Co integrated, yeah, and so there are different things we can do. We can look at the trailing volatility, we can try to tie down as many of the moving parts as possible so that we isolate our trade to bet on exactly what we have an opinion on. Whereas if you're saying, oh, the risk-free rate is changing so the stock market's going to do something else, there's a lot of intermediate steps and a lot of connections that can fail or stretch that will make that not work quite as well as you thought.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“That's exactly right. There were three legs to the trade. There was Cast Futures and the repo financing for the term. But stock trades, pair trades are not that different. So for instance, we're writing a model now to do better tax-less harvesting than the traditional way. And so when you identify a stock you want to sell to harvest the losses, you need to replace it with another stock. You want to find something that's substantially similar. And so you can find something, say, in the same sector with highly autocarbon, I'm sorry, coin to graduation.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“It can get very technical. I started out as an arbitrageur in the early 90s doing basis trades, which were very precise to do.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Disconnected, and things are very strange nowadays with the unemployment rate and everything just doesn't seem to be the way it used to be. And every time is a little different. So what I like to do when I want to make bets like that is to do things that are more like arbitrages where you can buy one asset or one asset class and sell another one as tightly as you can to make your thesis reflected in your trade, to have the best expression of your trade instead of just betting on say stocks going up, you can bet on one stock versus another stock or one sector versus another sector and make that trade more tight. And that's a way to insulate yourself from these sorts of things, these disconnects between theory and reality.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, to talk about narratives. Donna's narrative was, oh, rising rates are good for banks. So if rates went from 0% to 2% is good for banks, then 0% to 5% must be great for banks. In many cases for regional banks, as we know, it hasn't. Another thing is there's this narrative that Volcker, he went wild on the markets, caused a recession, and I kind of assumed that the stock market performed poorly. But actually, the drawdown was something like high 20s or low 30s drawdown, whereas the drawdown in the 1970s when the Fed was perhaps not aggressive enough was way worse. So just to pin you down, Michael, on that answer of it's hard to know about rising rates and discount rates and equity with premium. You don't know if equity risk premia are high or low. If they're high, you don't know that they're going down. If they're low, you don't know they're going up.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“People still don't understand, I think, how businesses will react and how they'll adapt. Obviously, the tech companies, the Silicon Valley startups got hit really hard because they were relying on private financing. And that really got affected by rising rates. And we saw what happened to the regional banks. And I think people are still confused. And the Fed itself is finding their way. People like to complain about them, but they're as smart as anybody can be. They're not going to make any decisions that are foolish, but it's hard to make these decisions to know when to stop hiking, when the economy is going to get hurt. A lot of people seem to think that no matter how much they hike, the economy is going to roll along and not go into recession. Nobody really knows, and every time it's just a little different. And I think that's why.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, you can't rely on the mechanism to be so precise and so timely. And also I think a lot of people have a disconnect. Most people haven't lived through a hiking cycle like this and certainly not through the kind of cycles that went into double digits like we had in the past.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Worth less. The future is worth less because you can get all this interest now. And that theory has been thoroughly challenged by the very vigorous rally we've had since October, as even as interest rates have exploded higher in a very short time period. What truth is there to that narrative? What does the history suggest about it? And is it one of those things where, okay, yeah, an average is slightly true, but you don't bet on it being every time because you can be disappointed, such as the past nine months.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Definitely expectations can be wrong, narratives can be wrong. Michael, one narrative that I was thoroughly convinced of. You couldn't change my mind about this, was that, and rationally it makes sense. You're be very familiar with what I'm talking about. Valuations of equities are reliant upon the risk-free rate, the discount rate. So stocks have a price, you know, S&P 500 has a price to earnings ratio of 25. That's like a 4% yield. If interest rates are at zero, there's a 4% at 2%, there's a 2% equity risk premium. It's a lot more complicated. I'm simplifying it. And therefore, if the 10 year goes from 2% to 4%, or the overnight rate, the Fed raises rates from zero to 5%, that is going to cause mechanically on a valuation perspective, equities, their future cash flows will be.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“You don't have to think of whether the price is going to go up or down. You have to think of whether it's going to go up or down relative to what everybody else thinks. You've got to outsmart everybody else. And that's the real trick. Something may seem obvious and you may say, oh, this is a great buy. Obviously these prices are going to go up, but that increase in prices already baked in. And it doesn't matter. What it has to do is go up more than everybody thinks. And that's the real trick.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, that comes up a lot when I talk to advisors and clients. And two big things come to mind. One is that the market is really a social construct. It's really just what people think. And that comes up a lot because of value investing, right? Value investing has a great story. It's a great narrative. It really sells from that standpoint. But there's no real mechanism, no real need for value to work. And everybody wants it to work, I think. Well, many people do. But it doesn't always work and it falls out of favor now and again. And the reason why it can't be completely tied to market valuations is because the market's social and what people think is what drives prices. And that leads into the second concept, which is very important, is that the prices adapt. Expect future earnings. And so”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Because they might go up, they just think, I need some money. Let's pick something that's gone up a lot already or something that's lost money and sell those assets.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, that's a great question. And I assume it's both, but I think the paper focuses more on the latter. And the idea, and it comes up a lot, you shouldn't sell something unless your thesis is violated. Or if you have something that can give you a greater return on capital, then that investment. And a lot of people focus on the emotions of it, the market's going up, so I'm going to stick with something. Or they say, oh, the market's gone up a lot already and I might as well sell it because it may not go up that much anymore. But what you should really do is have a thesis beforehand, game it out so that you don't get influenced by your biases, and then to say, well, has it met my target? Is my thesis still valid and choose what to buy and sell based on that? And I think that's really what the paper focuses on, that people don't really think that much about whether they should hold on to their positions.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“As much as 2% of their returns on the table, which is a lot. So that's a really good example of a bias. And I've talked to many of my portfolio managers over the years, and they confirmed it that they say that's absolutely what they do. They focus on the new thing and they don't think that much about the old thing.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Sure, there's a paper that I really like. I think it's called Buying Fast and Selling Slow. And it's based on Kahneman's work, obviously. But what the paper says is that most people, especially most institutional investors, focus on their buying decision. They come up with really interesting things that they want to buy and sell, what they want to buy. And then they try to find money to raise capital to buy those things. They have to sell some assets. And they don't think quite as much about those selling decisions. It makes a lot of sense in client-facing positions where you want to get some excitement for your new trade and you want to play down getting rid of some of your old trades. But as it turns out, a lot of people leave money on the table. They don't really focus on when to sell, what to sell. They just try to sell something to raise capital for this new interesting, shiny idea. And they leave.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Lately, because of AI is the ability to manage many different investments in many different positions, which is very difficult for people to do. But computers can scale easily. And so you can have hundreds or thousands of positions in your portfolio and benefit from your skill instead of being distracted by your luck. Even for great investors, luck pays a big part. And if you're a quantitative investor and you have many different bets at the same time, you can reduce that luck and focus on your skill.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT
“Well, there's a few things, and one of them touches on what you just mentioned. A lot of what you said is very important, but maybe important in the short term, or a lot of it is just confusing noise. The quantitative analysis helps us focus on long-term trends, on regime shifts, keeps us from being buffeted by this high frequency data that is very useful to a trader, but to a long-term investor can just bring us off course. And that control of biases, the ability to focus on what's important comes from the systemization of it. When we create rules and we research the rules and we make sure that we're confident in the thesis that we're making, it's easier to avoid these biases. So that's really, I think, the biggest benefit. Another really big benefit that is important.”
2023-07-13 · Forward Guidance · The Laws Of Quantitative Investing | Michael Robbins · IDENTIFIED FROM THE TRANSCRIPT