“[M]arkets will not reward naive perceptions of inter-market relationships that one learns in school because mass knowledge carries no edge.”
That’s true generally. But there’s a big but….
Some market edges persist. Value persists. The size premium persists. Momentum persists. That means we know about them. We can learn about them in school. They are part of the mass knowledge. But they remain true anyway.
I suspect that value persists because our behavioral and cognitive biases overcome our tendency to pile onto a good concept, trade or idea. I suspect the size premium exists because of the inherent and increasing inefficiencies of larger companies.
Whatever the reason, some edges persist even though they are well-known.
To be clear, these advantages aren’t always apparent. The markets can be as irrational in these areas as anywhere else. During the 1990s, growth crushed value for a very long time. But value wins overall and over the long haul.
So the next time someone suggests that mass knowledge carries no weight, remember the exceptions. Remember old always. Remember the big but.