if you do _one single simulation of it_ then the median result will be very negative returns!
but in fact the expected arithmetic mean of annualized returns is positive!
Conversation
But really a lot of my point is:
twitter.com/danrobinson/st
what you said there was literally false.
what you _meant_ may have been true!
But your whole point was some weird gotcha schtick involving a sentence you thought sounded bad for me.
and actually it sounds bad for you!
Quote Tweet
Replying to @SBF_FTX @SBF_Alameda and 3 others
How do I try to learn what some fund's expected returns are? I'll probably at least look at historical returns, right? (NOT 
INVESTING ADVICE)
Suppose there is 50 years of history. I compute historical returns by averaging the actual annual returns, right?
INVESTING ADVICE)
Suppose there is 50 years of history. I compute historical returns by averaging the actual annual returns, right?1
"averaging the actual annual returns"
should have been "geometric"
1
It's true regardless of whether you use arithmetic or geometric, right?
Quote Tweet
Replying to @SBF_FTX @SBF_Alameda and 3 others
OK, and you're saying that arithmetic mean of annual returns is appropriate?
What happens if you flip the coin not once a year, but once a day? Even faster growth in EV(wealth), right?
But what happens to your arithmetic mean of annualized returns?
1
Nope!
The EV of the arithmetic mean of your annual returns goes up the more you can flip because each flip is positive EV.
1
1
The tweet you're referring to never says EV, right? It is talking about what you do when you compute the historical average of returns.
Quote Tweet
Replying to @SBF_FTX @SBF_Alameda and 3 others
How do I try to learn what some fund's expected returns are? I'll probably at least look at historical returns, right? (NOT INVESTING ADVICE)
Suppose there is 50 years of history. I compute historical returns by averaging the actual annual returns, right?
INVESTING ADVICE)
Suppose there is 50 years of history. I compute historical returns by averaging the actual annual returns, right?1
If you arithmetically average the annual returns, it is extremely likely that 99% company will have a better # than kelly company
1
Only if you only flip the coin once a year.
If you flip the coin once a day, then the arithmetic mean returns will almost always be worse, right?
2
Also, do you notice that arithmetic mean returns depends on what timescale you measure at? So your investment strategy would change if the earth took longer to orbit the sun?
1
Quote Tweet
Replying to @SBF_FTX @danrobinson and 3 others
So yeah, in the long run, 99% still has higher arithmetic average annual returns if you're flipping 365 times per year almost surely, as (number of years) goes to infinity!
But if you instead only have ~60 years then you'll find weird "not in the infinite limit" results.