I do not think it would take millions of rational investors but someone at JP Morgan writing an algorithm. It would soon be copied by others. I imagine that is what has happened to all of the various factors. They seem to vanish as soon as they are discovered in the historical data. They once existed but maybe not anymore.They can continue to exist because not all market participants are rational, which is one of the flawed assumptions in CAPM.Why would a "factor" continue to exist, once the markets become aware of it.
As long as people keep bidding up the AMCs of the world based on belief in conspiracy theories or keep bidding up the TSLAs of the world because a guy with a terrible track record for predictions says he'll sell two robots to every person on earth by the end of next year, factors can continue to exist.
Statistics: Posted by jimkinny — Thu Aug 08, 2024 12:50 pm