Michael Steinhardt, in his book No Bull: My Life In and Out of Markets, defines “variant perception”:
I defined variant perception as holding a well-founded view that was meaningfully different from the market consensus…
Understanding market expectation was at least as important as, and often different from, the fundamental knowledge.
Having a variant perception, a well founded one, is likely to lead to returns in excess of the market. It’s a view that is counter or at least partially counter to the market consensus. This implies a dislocation in the market between expectations and reality.
A couple famous examples:
- Investment grade AAA-rated Mortgage-Backed Securities were much riskier than their AAA-rating implied.
- A small computer company’s music player would be successful.