Yeah, all too frequently markets just don’t do what models insist they should…

In my last job, I was able to correspond and meet with one of the current big names in quant finance. As regards, “Thus, the results of Avellaneda and Lee’s work are particularly interesting to me as they’re really pretty dull: something like a Sharpe of .9 and degrading briskly”, my guy had an extremely low risk, moderate return strategy which targeted positive returns with near-zero probability of negative monthly returns. The bottom line: almost every monthly return posted over 9 months or so was less than the nominal monthly t-bill return. Oh well.