I got great, consistent feedback from people who actually know finance that you cannot currently make 11% returns a year by value investing.https://twitter.com/s_r_constantin/status/1247301128980549632 …
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You commented on the value premium, but there is also literature on a momentum premium!
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Before I get into that, is my interpretation correct? higher momentum premiums indicate more prevalence of “herd behavior”/“popularity contest” phenomena?
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I am not aware of a robust "herd behavior" metric used in the market. And it's not clear to me that contrarians wouldn't cause crashes and booms. I.e. they would all be buying oil stocks now, until they found out everybody else was in oil, then all bail to the new uncool stock
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Seems to me the contrarian strategy is just a strategy to seek out market inefficiencies as the primary driver for outsized returns. It does supports your point that investing without seeking constant market inefficiencies will lead to runs.
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Counter point may be that non-contrarian-cool-guy investors believe that local, short-term inefficiencies average out over long term. The test you are looking for may be more a test of long term strategy that ignores short term inefficiencies
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