>covariances shift over time This is what I thought when I first ran across the theory in a book. I feel like it's a widespread pattern, there is some big intr

>covariances shift over time This is what I thought when I first ran across the theory in a book. I feel like it's a widespread pattern, there is some big intractable problem, and some genius says "aha, I can reduce this to..." but what they have reduced it to is also an intractable problem, only because of the novelty it feels like progress. Everybody goes around saying "ha, you can't predict future returns from prior returns, aren't we smart", but how can you predict future covariances from prior covariances any better? I'm not sure how useful Kelly betting is though, for similar reasons. Isn't it premised on knowing your edge, so knowing how much to bet is not such a valuable secret; you need to figure out how to identify your edge reliably. Particularly that it's not negative. I eventually decided the way to go is (1) start with every idea or security equal weighted, and (2) basically never rebalance, because things that outperform do tend to continue to do so and the "imbalance" reflects new knowledge disseminated by the market.