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 …
Keep ReadingSkepticism
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 …
Keep ReadingOn the Dangers of Conflating Experience and Expertise
Ben Carlson at A Wealth of Common Sense published an article about how many investors conflate experience and expertise in markets. This is one of the most misunderstood aspects of the investment business, and costs investors billions each year.
Keep ReadingNO, This Pension Fund is NOT Daytrading Your Retirement Funds, With Up to 500% Leverage
I recently came across an an article with the headline “This Pension Fund Is Daytrading Your Retirement Funds, With Up To 500% Leverage.” It linked through to the article from Pension360 entitled (only slightly less sensationally) “Is This Pension Fund Day Trading With Its Portfolio?”
Keep ReadingSigma Sensationalism Syndrome
The article explores the substantially large outflow of money form high-yield bond funds in the first week of August. For clarity, in our practice we don’t pay attention to indicators like these since we’ve yet to see compelling evidence that they provide any reliable insights into future expected returns. Nonetheless, we always enjoy taking a look at interesting numbers, especially when they’re used to characterize incredible events.
Keep Reading86 Years of Lies
Recently, Equius Partners published an interesting piece, which was picked up by The Big Picture. I’ve posted it in it’s entirety below, but for the moment, we have a few issues that I need to get off our chest.
Keep ReadingWhat the Heck is a “Stock Picker’s Market?”
Just a quick thought today: We often come across articles talking about how this is/isn’t a “stock picker’s market.”
Some articles begin with the idea that a stock picker’s market is one in which the internal correlation amongst the S&P 500 stocks is low. This low correlation creates the opportunity for astute investors to choose stocks with a chance to materially outperform the index.
Keep ReadingLogical Fallacy Series: Strawman
We recently decided, on the basis of coming across these things all the time, to write a series of blog posts about logical fallacies. Our hope is to give you the tools to recognize flawed arguments more quickly, before they lead to poor decisions.
Keep ReadingSimplicity & Complexity: What Go Teaches Us About Investing, Part 1
I was recently reading a splendid article in WIRED magazine specifically addressing the the lack of computer dominance over human players in the Chinese strategy game Go. This post borrows heavily from that article, and I would …
Keep ReadingA Rough Guide to Spotting Bad Science
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