3 ms·

TL;DR Over-fitting investment models is pseudo math.

• lintiness 11y ago
  the greatest overfitting of an investment scheme the world has ever known: markets must go up.
  • pzone 11y ago
    Er, no, that's basic economics. If you make an investment, you are going to expect some sort of profit, on average.
    • MR4D 11y ago
      That's a different issue. I think what @lintiness is trying to say is that just because a market went up in the past does not mean it will in the future. Survivorship bias is absolutely huge here. Most people forget this, but if you look at global markets since the early 1900's, there were several that went down and never came back up. Germany's markets failed on at least one occasion and never came back. A good paper that addresses part of this is here: http://www.researchgate.net/publication/4913017_Global_Stock_Markets_in_the_Twentieth_Century http://www.researchgate.net/publication/4913017_Global_Stock... Depression and war do many things that create discontinuities. Most people don't come close to thinking about those because they aren't knowledgeable enough to even understand how strong the survivorship bias in their current local market like the US.