Don Fishback

Measure, Don't Model: The Forest and the Trees

Chris B -

Couldn't have said it better.

I will note one thing -- at least in the academic community -- they don't like simple. That's because it doesn't impress anybody. The more elegant the equation, the more likely you'll get that PhD. So there is a huge disincentive among quants in academia to try to come up with a simple solution.


On Jan 09 11:19 AM Chris B wrote:

> The takeaway lesson is that quantitative strategies in the stock
> market are inherently self-defeating. Hundreds of thousands of very
> smart people with advanced math and IT training are analyzing gobs
> of market data every day, trying to find some pattern that will predict
> future results. When the data indicate a pattern, they will all
> plow in and obliterate whatever arbritage opportunity or variable
> relationship they have identified. This behavior changes the nature
> of the market that their model once predicted, making the model obsolete.
> That's why no one investing method always outperforms all others.
> If that were true, everybody would soon be following that method,
> bidding up prices and reducing returns in concentrated areas. Cyclical
> markets exist for a reason.
>
> I certainly don't think markets are efficient, but expecting to be
> the market participant who identifies a pattern before everyone else,
> buys before everyone else, and sells before everyone else sounds
> like a fool's errand to me.