Industry Illusions


Global Equity Momentum: A Craftsman’s Perspective – Executive Summary

Global Equity Momentum: A Craftsman’s Perspective – Executive Summary

Quantitative investment researchers often seek uniquely optimal parameterizations of their strategies amongst a broad “robust” region of parameter choices. However, this ignores a critically important feature of investing – Diversification. By diversifying across many equally legitimate parameter choices – an ensemble – investors may …

Part 2: Evidence Based Investing is DeadLong Live Evidence Based Investing!

Part 2: Evidence Based Investing is Dead
Long Live Evidence Based Investing!

Edesess’ case against evidence-based investing rests on three general assertions. There is a very real issue with using a static t-statistic threshold when the number of independent tests becomes very large. Financial research is often conducted with a universe of securities that includes a large number of …

Evidence Based Investing is Dead.Long Live Evidence Based Investing! Part 1

Evidence Based Investing is Dead.
Long Live Evidence Based Investing! Part 1

Michael’s case against evidence based investing rests on three general assertions. First, there is a very real issue with using a static t-statistic threshold when the number of independent tests becomes very large. Second, financial research is often conducted on a universe of securities that includes a large number of …

Asset Allocation is Not for the Faint of Heart(Long Live Diversification)

Asset Allocation is Not for the Faint of Heart
(Long Live Diversification)

Asset allocation is pretty complicated, and not for the faint of heart. For my money, investors have the greatest chance of hitting long-term financial goals by investing in the most diversified portfolio possible (choose your definition), and saving as much as they reasonably can. Any precision beyond this level is a triumph of hope over uncertainty.

The Importance ofAsset Allocation vs. Security Selection: A Primer

The Importance of
Asset Allocation vs. Security Selection: A Primer

By far the greatest source of personal consternation as a professional in markets is investors’ obsession with finding the best stocks, or the best stock pickers. The fact that investors pursue this objective at all undermines all meaningful arguments about efficient markets …

Bold, Confident & WRONG:Why You Should Ignore Expert Forecasts

Bold, Confident & WRONG:
Why You Should Ignore Expert Forecasts

If you read the paper, watch the news, and listen to investment experts you are doing it all wrong. There are no market wizards; the emperors have no clothes; most people are ‘swimming naked’. The following paragraphs offer abundant and incontrovertible evidence …