A Random Walk Down Wall Street, analyst accuracy, forecasts, Stock selection criteria, Efficient-market hypothesis, EMH, Eugene Fama, random walk hypothesis, MPT, Fama, Fisher, Jensen, and Roll, CAPM, Modern Portfolio Theory,, monkey throwing darts, random stock picks, monkies beat stock pickers

In-Depth Notes From RobinHood 2017 Investment Conference

RobinHood 2017 investment notes now full version up - these are not a verbatim transcript nor an in-depth analysis but notes from the conference numbering over 10,000 words. We did not get all speakers but got most and might add one more speaker slide but besides that we are out of notes and time to move onto upcoming conferences (stay tuned for that). Below is a brief excerpt followed by the full note document for premium readers.

What is active vs. passive?

Passive is where the value proposition is performed at index, and the manager does not take a view. It has grown substantially over the past few years.
Active is where you give a better outcome to investors and is more ambitious.
Why has passive grown?
Technology has changed the way information is delivered.
In a ZIRP environment, it is harder to justify fees if you are not outperforming.
Central banks changed the rules of the game due to the decoupling between fundamental value and asset prices.
Mispricing of risk – too many people are assuming we are living in a risk-free environment.
Do you think there is a market disruption?
Central banks did a lot of things while addressing the last crisis.
Mario Draghi said he would do whatever it takes to save the world.
Example In Europe, people are buying 100 bonds for 1-2%. We are living in a fragile environment where people wonder if the euro will continue to exist 100 years from now.
Active vs. passive
It has always been a cyclical story that has never been finished.
Between 2009 and 2016, passive has had an incredible run.
You do not anchor the idea that the returns available in the market will be there forever.
We are now in a tipping point where passive is in a virtuous cycle.
What is your view on active going?
I am optimistic on active.
There are high valuations leaving less room for error.
The correlation between stocks has come down, and investors are becoming more discerning.
Value stocks have mean reversions.
Investors today are not pricing risk. Passive is being viewed as a risk-free proposition.
There is a good environment to invest in active.
What do you think about active strategy (CDP)?
It diversifies your strategies
Nature of passive investments
It could be a renaissance of active management.
What do you think about active management in the future?
Bonds used to be return + security.
ETF created an extraordinary opportunity for active managers.
Active is not only bottom-up but top-down.
The combination of big data/ML and active management can be very powerful.


What do you think of Malkiel’s perspective that active managers are monkeys throwing darts?

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