Thank you so much, Dario. This is very thought-provoking.
An obvious question perhaps: what prevents you from exploiting this signal? It looks like there is a type of ETF — a large illiquid one — where something you can specify a priori as “good performance” is followed systematically by poor performance. Why not short such funds? Or is the classification of “good performance” only possible a posteriori?
What do the features you’ve found suggest about broader market phenomena? Are all stocks self-inflated to an extent? Does that mean they may one day self-deflate, e.g. when demographic changes lead to net outflows?
Thank you so much, Dario. This is very thought-provoking.
An obvious question perhaps: what prevents you from exploiting this signal? It looks like there is a type of ETF — a large illiquid one — where something you can specify a priori as “good performance” is followed systematically by poor performance. Why not short such funds? Or is the classification of “good performance” only possible a posteriori?
What do the features you’ve found suggest about broader market phenomena? Are all stocks self-inflated to an extent? Does that mean they may one day self-deflate, e.g. when demographic changes lead to net outflows?