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Barry Ritholtz

Average Returns, Rarer Than You Think

Markets are like a roller coaster, rarely yielding returns that hit the average.
Maybe he's happy with beta.

Maybe he's happy with beta.

Photographer: Andrew Burton/Getty Images

One of the most fascinating things about markets is the sheer volume of data they generate. Every day, millions of data points get created. The vast majority of this amounts to little more than noise. This endless stream of information leads thousands of us everyday on a hunt for meaningful signal amid the cacophony.

Most of the time, we are unsuccessful. We can be tricked into seeing significance where none exists. Our pattern recognition engines are fooled by what turns out to be mere randomness (there’s a good idea for a book in that). There is a meaningful needle buried somewhere in the haystack of numbers, but we underestimate both how hard it is to identify, and just how huge that stack is.