Alpha

What is alpha? For those who spent their time in college perfecting the art of keg stands and discussing the finer points of beerpong, alpha may merely mean the first letter in the greek alphabet. For high priced lawyers and corporate rockstars, alpha provides a convenient description for their position at the top. However, to active investors and traders, alpha has special significance.

The alpha we are looking for is that extra return to be found in a market where inherent and predictable behavioral biases among both retail investors and fund managers result in mispriced assets. Classic economists and other academics would tell us that alpha is a myth. That the market is efficient and any additional returns we earn are due to luck or increased risk. I’d like to explore and challenge that assumption by discussing theories, strategies and by testing ideas both on paper and with my own money. Please join me in my quest to beat market averages over the long run.

Sunday, November 21, 2010

quick update... all calls and puts

Unbelievable,
  I did not expect the trends to hold, but all seven calls from last month would have turned out profitable.  Every call and put I wrote expired worthless, and I would have netted quite a bit of money.  I will try to post a second test tomorrow, as 7 trials does not a conclusion make.
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