James Harris Simons on EMH and Investing

contenu

James Harris Simons, founder of Renaissance Technologies, agrees with Value investors on the Efficient Market Hypothesis (EMH).

Trends

Followers of Benjamin Graham — Warren Buffett's mentor — don't usually care much for trends. But Simons contends that there exist trends that are too subtle for the average investor to even identify.

This is in agreement with what Graham himself wrote:

"To enjoy a reasonable chance for continued better than average results, the investor must follow policies which are (1) inherently sound and promising, and (2) not popular on Wall Street."

Chapter 1: Investment versus Speculation, The Intelligent Investor.

"any approach to moneymaking in the stock market which can be easily described and followed by a lot of people is by its terms too simple and too easy to last."

Chapter 8: The Investor and Market Fluctuations, The Intelligent Investor.

EMH

Simons emphasizes that the central tenet of the Efficient Market Hypothesis (EMH) that "the price is always right" is "just not true".

Simons' views on the Efficient Market Hypothesis (EMH) are therefore no different from those of famous Value Investors such as Warren Buffett and Seth Klarman.

Watch Videos

Simons: EMH

Simons - Full Interview

Simons contends that there exist trends that are too subtle for the average investor to identify without sophisticated models and equipment.

Daniel Kahneman

A Nobel Laureate in Economic Sciences, Daniel Kahneman too explains how formulas (or models) beat individual judgment in situations with weak cues and marginal long-term predictability.

Résumer
James Harris Simons, the founder of Renaissance Technologies, aligns with value investors regarding the Efficient Market Hypothesis (EMH). While traditional value investors, like those following Benjamin Graham, often disregard trends, Simons argues that subtle trends exist that average investors cannot detect. He references Graham's assertion that successful investing requires strategies that are sound yet unpopular on Wall Street. Simons challenges the EMH's core idea that 'the price is always right,' asserting it is fundamentally flawed. His perspective mirrors that of renowned value investors such as Warren Buffett and Seth Klarman. Simons emphasizes the necessity of sophisticated models and equipment to identify these elusive trends, suggesting that individual judgment often falls short in scenarios with weak cues and limited long-term predictability. This viewpoint is echoed by Daniel Kahneman, a Nobel Laureate in Economic Sciences, who advocates for the superiority of models over individual judgment in complex investment situations.