@AllQuant：💪💪💪𝙋𝙚𝙧𝙢𝙖𝙣𝙚𝙣𝙩 𝙀𝙙𝙜𝙚𝙨💪💪💪 In the context of markets, "permanent edges" refer to sustainable advantages or profitable strategies that give some market participants an enduring advantage. In other words, a permanent edge is a competitive advantage that allows a trader or investor to consistently outperform the market over a long period. This advantage can be based on a variety of factors, such as superior information, expertise in a particular market or asset class, access to unique data or resources, or a well-established network of industry contacts. However, it's important to note that none of the advantages stated above are truly permanent. Market conditions, regulations, and technological advancements can all disrupt previously successful strategies, so even the most successful traders and investors must continually adapt and evolve their approaches to maintain their edge. Quantitative investors need truly permanent edges for their models to continue working for a long time after the model has been created. Permanent edges are built on something that has reliably consistent repeating patterns. Hence, most successful quantitative models exploit repeatable human behavior because let's face it, despite how humans have evolved over the years, our base nature remains unchanged. We are still guided by the basic emotions of greed and fear. Trend-following, asset allocation, and volatility risk premium are all potential permanent edges in markets because they are all underpinned by crowd behavior. They have been shown to provide sustainable advantages over time and successful large hedge funds have exploited these edges over a long period. 𝙏𝙧𝙚𝙣𝙙-𝙛𝙤𝙡𝙡𝙤𝙬𝙞𝙣𝙜 is a strategy that involves buying assets that have shown an upward trend in price and selling those that have shown a downward trend. This strategy is based on the idea that markets tend to move in trends that can persist over time. By following these trends, traders can profit from the momentum of the market. While trend-following strategies may not work in all market conditions, they are profitable over the long term, making them a potential permanent edge. 𝘼𝙨𝙨𝙚𝙩 𝙖𝙡𝙡𝙤𝙘𝙖𝙩𝙞𝙤𝙣 refers to the process of allocating investments across different asset classes, such as stocks, bonds, and real estate. By diversifying across different asset classes, investors can potentially reduce their overall risk while still achieving their desired level of return. Asset allocation can also help investors capture the long-term trends of different markets, as different asset classes tend to perform differently over time. This diversification and exposure to various asset classes have been shown to provide sustainable advantages over time, making asset allocation a potential permanent edge. 𝙑𝙤𝙡𝙖𝙩𝙞𝙡𝙞𝙩𝙮 𝙧𝙞𝙨𝙠 𝙥𝙧𝙚𝙢𝙞𝙪𝙢 refers to the compensation that investors can receive for bearing the risk of market volatility. This risk premium arises because many investors are risk-averse and are willing to pay a premium to protect themselves against market volatility. By selling options and other derivatives that are sensitive to volatility, traders can capture this risk premium over time. The volatility risk premium is a persistent feature of financial markets, providing a potential permanent edge for traders who can effectively capture it. Although few strategies can provide a truly permanent edge, trend-following, asset allocation, and volatility risk premium have all been shown to provide sustainable advantages over time, making them potential permanent edges in markets. 𝙏𝙝𝙚𝙨𝙚 𝙖𝙧𝙚 𝙩𝙝𝙚 𝙥𝙚𝙧𝙢𝙖𝙣𝙚𝙣𝙩 𝙚𝙙𝙜𝙚𝙨 𝙬𝙚 𝙚𝙢𝙥𝙡𝙤𝙮 𝙞𝙣 𝙢𝙮 𝙢𝙪𝙡𝙩𝙞-𝙨𝙩𝙧𝙖𝙩𝙚𝙜𝙮 𝙥𝙤𝙧𝙩𝙛𝙤𝙡𝙞𝙤. 𝙁𝙚𝙚𝙡 𝙛𝙧𝙚𝙚 𝙩𝙤 𝙫𝙞𝙨𝙞𝙩 𝙤𝙪𝙧 𝙬𝙚𝙗𝙨𝙞𝙩𝙚 𝙩𝙤 𝙡𝙚𝙖𝙧𝙣 𝙝𝙤𝙬 𝙩𝙤 𝙚𝙭𝙥𝙡𝙤𝙞𝙩 𝙩𝙝𝙚𝙨𝙚 𝙥𝙚𝙧𝙢𝙖𝙣𝙚𝙣𝙩 𝙚𝙙𝙜𝙚𝙨. https://www.allquant.co/ $SPDR S&P 500 ETF Trust(SPY)$ $iShares 20+ Year Treasury Bond ETF(TLT)$ $SPDR Gold Shares(GLD)$ Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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