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My eyes glazed over at the vast number of priors introduced in this work. Why should I believe the assumptions hold? In Machine Learning, the standard expectat
by ericjang 9y ago
My eyes glazed over at the vast number of priors introduced in this work. Why should I believe the assumptions hold?
In Machine Learning, the standard expectation of research papers is to empirically demonstrate the increased statistical power of the model over benchmarks, and I wish the authors demonstrated that their model aligns with historical reality.
I attended a talk recently by Aswath Damodaran where he explained that there are two types of investors, most often lying in disjoint sets: 1) number crunchers and 2) story tellers. Perhaps the success of tech companies (e.g. AMZN, GOOG, FB) can be explained in aggregate via the Wright model, but my feeling is that the majority of 'optimal portfolio distortion' these companies caused is mostly idiosyncratic to those specific companies, e.g. the "story tellers" have more information in the long-term behavior of a company. Consequently, aggregate modeling captures statistical correlation rather than causation, which can still make money but is not robust to long tails.
I think number crunching is only useful for short horizon portfolio selection.
- fnbr 9y ago> In Machine Learning, the standard expectation of research papers is to empirically demonstrate the increased statistical power of the model over benchmarks, and I wish the authors demonstrated that their model aligns with historical reality. I went to graduate school in econometrics after taking several undergraduate courses in ML, and I was constantly astounded how paper after paper failed to do this. I don't think you can (or should) claim a result if you can't demonstrate that it works empirically.
- soVeryTired 9y agoMathematical finance as a field has gone down a deep, dark, weird rabbit hole. The point of papers in the field is rarely to make a statement about how to invest, or how markets work. The point is to do a load of funky maths, showing off how clever you are, and then claim a tenuous link to finance. If anyone doubts what I'm saying, they should look up the definition of "No free lunch with vanishing risk" [1] and tell me how it relates to the real world. [1] https://en.wikipedia.org/wiki/No_free_lunch_with_vanishing_risk https://en.wikipedia.org/wiki/No_free_lunch_with_vanishing_r...
- fapjacks 9y agoPlease excuse my total ignorance, but could part of the reason for this be some kind of personal advertising for the financial industry (e.g. "Look at how smart I am, hire me for your quant fund!")?
- igk 9y agothe buzzword you want is Mathiness https://en.wikipedia.org/wiki/Mathiness https://en.wikipedia.org/wiki/Mathiness