# Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypotheses



## tech/a

I'm on the search for any papers relative to any analysis F/A or T/A that has been rigorously tested
The result positive or negative is un important. The veracity of the testing is however---must be Evidence based.

If you know of any could you post up a link.

Have a bit from Dr Bruce Vanstone and a few others.

Howard Bandy??
Deep State??
Craft??
Sinner??

Anyone else interested in this stuff?


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## craft

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> I'm on the search for any papers relative to any analysis F/A or T/A that has been rigorously tested
> The result positive or negative is un important. The veracity of the testing is however---must be Evidence based.
> 
> If you know of any could you post up a link.
> 
> Have a bit from Dr Bruce Vanstone and a few others.
> 
> Howard Bandy??
> Deep State??
> Craft??
> Sinner??
> 
> Anyone else interested in this stuff?




http://papers.ssrn.com/sol3/results.cfm?RequestTimeout=50000000

Just use the search facility and knock yourself out. 

Following the references in papers of interest becomes a great source for finding further papers.


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## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



craft said:


> http://papers.ssrn.com/sol3/results.cfm?RequestTimeout=50000000
> 
> Just use the search facility and knock yourself out.
> 
> Following the references in papers of interest becomes a great source for finding further papers.




Yes thanks
Know of that.

But really hoping people will have come across
ones which they have found to be of great interest.

Recommended reading if you like.


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## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Seminal paper (if you pick one it should be this): "Value and Momentum Everywhere" by Asness et all http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2174501



> We study the returns to value and momentum strategies jointly across eight diverse markets and asset classes. Finding consistent value and momentum premia in every asset class, we further find strong common factor structure among their returns. Value and momentum are more positively correlated across asset classes than passive exposures to the asset classes themselves. However, value and momentum are negatively correlated both within and across asset classes.* Our results indicate the presence of common global risks that we characterize with a three factor model. Global funding liquidity risk is a partial source of these patterns, which are identifiable only when examining value and momentum simultaneously across markets.* Our findings present a challenge to existing behavioral, institutional, and rational asset pricing theories that largely focus on U.S. equities.




Asness doesn't just research this stuff for fun, he is a big player who co-founded AQR Capital with like ~$120b FUM and good track record since 1998.

But realistically, there are sooooo many papers which cover this stuff, it'd be impossible to build a list which does it justice. So I am picking a few random ones from my notes. 

Almost all of these papers are the basis for what happens at the worlds largest hedge funds and most of these names work at one or more of these funds as advisers:

On the value front, nobody has produced more mountains of work than Fama+French, who have their own website full of all the data you could ever need to validate and reproduce their findings.

I would say that allocators like James Montier, John Hussman Cliff Asness and so on represent the culmination of implementing all available information (TA and FA) into a single highly performant strategy. Then there are people like Eric Falkenstein who think everything is wrong and we should all just invest in low volatility (which is also hard to disagree with given his justification).

"The Dao of Corporate Finance, Q Ratios, and Stock Market Crashes" by Mark Spitznagel on Tobins Q and valuations.

"Cape Around the World: Update 2014 – The Relationship between Risk and Return" http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2470935


> We update our annual analysis of expected returns for 38 equity markets around the world. Based on current CAPE valuations, we expect mid to high single-digit yearly returns in most developed equity markets. However, risks are elevated for some markets. We specifically investigate drawdown risk and find that given its current valuation levels, the US market in particular exhibits a high risk of significant future drawdowns.




Value Versus Growth: Australian Evidence by Gharghori, Stryjkowski and Veeraraghavan
(you can google "ssrn value premium australia" to see a *huge* body of work on this)

"The Cross Section of Expected Holding Period Returns and Their Dynamics: A Present Value Approach" http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2182628 (I really like this approach)


> We provide a tractable model of firm-level expected holding period returns using two firm fundamentals ― book-to-market ratio and ROE ― and study the cross-sectional properties of the model-implied expected returns. We find that: 1) firm level expected returns and expected profitability are time-varying, but highly persistent; 2) forecasts of holding period returns strongly predict the cross section of future returns up to three years ahead. We document a highly significant predictive pooled regression slope for future quarterly returns of 0.86, whereas the popular factor-based expected return models have either an insignificant or a significantly negative association with future returns. In supplemental analyses, we show that these forecasts are also informative of the time-series variation in aggregate conditions: 1) for a representative firm, the slope of the conditional expected return curve is more positive in good times, when expected short-run returns are relatively low; 2) the model-implied forecaster of aggregate returns exhibits modest predictive ability. Collectively, we provide a simple, theoretically-motivated, and practically useful approach to estimating multi-period ahead expected returns.




"Enhancing the Investment Performance of Yield-Based Strategies" http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2051101


> High dividend yield stocks do not reliably earn above-average risk-adjusted returns. More complete measures of shareholder yield, which account for net share repurchases, perform better. We explore the use of net-debt paydown as a way to further enhance shareholder yield. The addition of net-debt paydown enhances risk-adjusted returns and creates a shareholder yield metric that is more robust over time. We also explore the technique of separating yield metrics by payout percentage as a way to enhance return predictability. We find some evidence that using payout percentage within a yield category can systematically improve portfolio performance.




On the T/A side:

"Relative Strength Strategies for Investing" by Mebane Faber (and the various updates to this paper) e.g.
"A Quantitative Approach to Tactical Asset Allocation" 
"Absolute Momentum: a Simple Rule-Based Strategy and Universal Trend-Following Overlay" by Gary Antonacci and related
"Risk Premia Harvesting through Dual Momentum"
"Does trend following work on stocks?" by Cole Wilcox and Eric Crittenden
"Feasible Momentum Strategies Evidence from the Swiss Stock Market" by Rey and Schmid (academics, not traders)
"Residual Momentum" by Blitz, Huij, Martens
"MR Swing:  A quantitative system for mean‐reversion and swing trading in market regimes" by Abrams and Walker (this one won some kind of award and AFAIK the system is still in use)
"Momentum and Markowitz" by Keller, Butler, Kipnis http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2606884


> Mean-Variance Optimization (MVO) as introduced by Markowitz (1952) is often presented as an elegant but impractical theory. MVO is "an unstable and error-maximizing" procedure (Michaud 1989), and "is nearly always beaten by simple 1/N portfolios" (DeMiguel, 2007). And to quote Ang (2014): "Mean-variance weights perform horribly… The optimal mean-variance portfolio is a complex function of estimated means, volatilities, and correlations of asset returns. There are many parameters to estimate. Optimized mean-variance portfolios can blow up when there are tiny errors in any of these inputs...".
> 
> In our opinion, MVO is a great concept, but previous studies were doomed to fail because they allowed for short-sales, and applied poorly specified estimation horizons. *For example, Ang used a 60 month formation period for estimation of means and variances, while Asness (2012) clearly demonstrated that prices mean-revert at this time scale, where the best assets in the past often become the worst assets in the future*.
> 
> In this paper we apply short lookback periods (maximum of 12 months) to estimate MVO parameters in order to best harvest the momentum factor. In addition, we will introduce common-sense constraints, such as long-only portfolio weights, to stabilize the optimization. We also introduce a public implementation of Markowitz's Critical Line Algorithm (CLA) programmed in R to handle the case when the number of assets is much larger than the number of lookback periods.
> 
> We call our momentum-based, long-only MVO model Classical Asset Allocation (CAA) and compare its performance against the simple 1/N equal weighted portfolio using various global multi-asset universes over a century of data (Jan 1915-Dec 2014). At the risk of spoiling the ending, we demonstrate that CAA always beats the simple 1/N model by a wide margin.




and so on. Basically, SSRN is your friend. Again, I would stress that this is merely a tiny random selection from my research notes, the amount of research out there is more than anyone could hope to read.


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## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

It's important  to add that

"TA"

and

"FA"

are crappy crappy labels to apply, since they both encompass a huge range of competing strategies.

As an example, quantitative analysis of timeseries is not just about trend following and momentum, but alpha can be generated from mean reversion. Then there are differences based on time scale, trade size, etc. And again, differences across markets (some are trendier than others, FX, for example).

Same for "FA", this is a huge field. It's not just about buying cheap stocks! The factors include, value, momentum (e.g. earnings momentum), volatility (e.g. earnings volatility), quality, liquidity, and so on.  And again, differences across markets (you can buy EURUSD if you think it's undervalued on a PPP basis or something) and so on. Some fundamental shops do nothing but short fundamentally crappy companies (e.g. Sino Forest).


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## ThingyMajiggy

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

This webinar is kind of along those lines tech, he goes on and shows that there is apparently no edge in fibs, S/R etc. and show's what there apparently is an edge in....plus other stuff. Might be of interest(if you can watch through an hour and 50min). 

Also goes on about randomness and how the markets are mostly noise and that even though we may know of some successful traders that could still be random/chance. Interesting thoughts....


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## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



ThingyMajiggy said:


> This webinar is kind of along those lines tech, he goes on and shows that there is apparently no edge in fibs, S/R etc. and show's what there apparently is an edge in....plus other stuff. Might be of interest(if you can watch through an hour and 50min).
> 
> Also goes on about randomness and how the markets are mostly noise and that even though we may know of some successful traders that could still be random/chance. Interesting thoughts....





I don't think there is much use in arguing about the effectiveness of S/R or fibs or whatever, since there is no replicable technique being applied here by traders. Some use different timeframes, some will trade the breakout of S/R, others the retrace, some will fade, some might use the 50% retrace, others might use the 50 day high or midpoint between 50 day high and low, etc. For each strategy, the chosen asset classes, leverage, capitalisation, position sizing, stop loss size, market regime and adaptivity, etc will play a huge role in long run robustness. 

I know and like an intraday strategy which trades breakouts of 10 bar highs/lows on 1 min charts. It works in 3 major assets, providing robust and statistically significant results over hundreds of walk forward trades. Without the position sizing algorithm implemented, it would not be robust over the long term. If I traded it on the daily it would die a long slow death and if I traded it on the 5 minute chart it would get chopped to pieces in less than a year. 

More thoughts from my own observations:

Most trading strategies fit into broad groups, these broad groups can then actually be condensed into 3 major groups (4 if you have access to leverage).

The return profiles for these 3 major groups look just like the return profiles for investing in a large cap company. They tend to go to the upper right hand of the equity chart over time, with some volatility along the way.

These returns perform over the long term on a valuation basis, just like a large cap company might (because in aggregate, most businesses are long in the momentum or mean reversion of something or other - the most common thing being economic growth). 

That is to say, you will find that periods of underperformance in trend following strategies come immediately after periods of outperformance. If outperformance persists for a long time, then the proceeding underperformance will persist for a long time (and vice versa). 

As strategies begin to outperform, demand for the strategies increases, driving the future returns on those strategies down (e.g. crowded trade). As strategies begin to underperform, demand for the strategies decreases, driving future returns on those strategies up.

I have definitely seen this unfolding in real time across different strategies. The best example is of course the GFC. At the lows of the GFC, demand for trend following/absolute momentum/relative strength/volatility adjusting/risk limiting strategies was at an all time high (witness the price of vol as proxied by VIX). Which strategy outperformed over the next 5 years? Buy and hold was certainly hard to beat! Then in 2013 after B+H continued to outperform, investors piled into low cost index funds (at valuation highs and volatility lows), is exactly when relative strength really took off providing crazy returns for sector and country RS investors. The current fad is figuring out how to stay leveraged long (in case bull run in large caps continues) while being protected from 2008 style losses, so my guess is that mean reversion strategies (e.g. 60/40 stocks/bonds, value, equal weight, permanent portfolio, 3 way system, etc) will outperform until demand picks up for those.

It is possible to mix and match strategies for a very smooth equity curve. Forgive me for saying the name a lot but if you look at what John Hussman does in his stock fund is to buy value stocks (and did an excellent job at stock picking, outperforming Russell 2000 Value over >20y on raw and risk adjusted metrics) with a beta as close to the SP500 as 1, so that the portfolio can be hedged on a macro valuation/risk metric (breadth, credit spreads, etc)/volatility basis with index options. The goal being to optimise allocation across all 4 major groups (he uses options for leverage where appropriate).

I have posted this link previously, but appropriate here:
https://cssanalytics.wordpress.com/...et-allocation-lessons-from-perold-and-sharpe/


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## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Do we really need proof that buying $1 for 50 cents is profitable?

The only difficulties is making sure it's actually $1. How do you make sure of that? Look carefully at the business.

But then some would look at the business and say, it's not worth $1 now but it will be $1 in the future... So that's where all the fun comes in.


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## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> Do we really need proof that buying $1 for 50 cents is profitable?
> 
> The only difficulties is making sure it's actually $1. How do you make sure of that? Look carefully at the business.
> 
> But then some would look at the business and say, it's not worth $1 now but it will be $1 in the future... So that's where all the fun comes in.




Everyone is making a bet one way or another. The idea is to derive information from data that reduces the possibility of risk while maximising possibility of reward. Some people do this using the numbers that come from financial reports, others use the numbers that come from the price of the asset (or related assets), some combine it all together. It's clear that alpha can be generated from all of those approaches.

Evidence suggests that over the short term, price is difficult to predict and governed much more by investor risk preferences. However over the long term, investment securities can be expected to return a value approximate to their long term stream of cash flows (which can be forecast). So both matter.

The point is not about proof, but rather about evidence.


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## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> Do we really need proof that buying $1 for 50 cents is profitable?
> 
> The only difficulties is making sure it's actually $1. How do you make sure of that? Look carefully at the business.
> 
> But then some would look at the business and say, it's not worth $1 now but it will be $1 in the future... So that's where all the fun comes in.




Yes I think we do.
in fact many many accepted and adopted trading and investing ideas and methods are used by just about everyone WITHOUT any evidence based validation.

Just taking 2 widely accepted ideas.

Buying Value 
Buying increasing Volume

You me and 10000 others will trade the exact same signals multiple ways and offering just as many
differing reasons for any failures.
But where is the evidence that you/me or the other 10000 of us have a snowballs chance in hell to return a consistent profit.

90% according the evidence I have on trader success-----fail---longer term.
So those who adopt the two ideas above would be in that lot.
I presume---(although I don't have the evidence) that some of the 10% also reside there.

So If I'm going to be in that 10% or have ambitions of being there 
Id want Evidence---not just a belief that has been touted around for years---works.


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## craft

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> So If I'm going to be in that 10% or have ambitions of being there
> Id want Evidence---not just a belief that has been touted around for years---works.




You'll only find evidence of regularities - not immutable laws. Unless you can predict the future you will not know how long the regulatory will be stationary. Some results with the appearance of regularities just result from the data mining process and are unlikely to persist beyond random others may have a cause but every man and his hedge fund is in a race to harvest the causal regularities which will inevitably arb them away. The hardest to harvest or most obscure will likely persist the longest.

I suspect what defines your 10% is they "know" they are dealing with uncertainty and lack of evidence and come up with solutions to still cope. Continual checking of their beliefs against reality and adaption when reality dictates it necessary.

The best that evidence based approach can achieve is a regularity that has cause rather than arising from randomness.  But because the regulatory may not be stationary in the future as people try to harvest it you still have to manage uncertainty.


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## KnowThePast

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



craft said:


> You'll only find evidence of regularities - not immutable laws. Unless you can predict the future you will not know how long the regulatory will be stationary. Some results with the appearance of regularities just result from the data mining process and are unlikely to persist beyond random others may have a cause but every man and his hedge fund is in a race to harvest the causal regularities which will inevitably arb them away. The hardest to harvest or most obscure will likely persist the longest.
> 
> I suspect what defines your 10% is they "know" they are dealing with uncertainty and lack of evidence and come up with solutions to still cope. Continual checking of their beliefs against reality and adaption when reality dictates it necessary.
> 
> The best that evidence based approach can achieve is a regularity that has cause rather than arising from randomness.  But because the regulatory may not be stationary in the future as people try to harvest it you still have to manage uncertainty.




craft, more and more I come to exactly this line of thinking.


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## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> Yes I think we do.
> in fact many many accepted and adopted trading and investing ideas and methods are used by just about everyone WITHOUT any evidence based validation.
> 
> Just taking 2 widely accepted ideas.
> 
> Buying Value
> Buying increasing Volume
> 
> You me and 10000 others will trade the exact same signals multiple ways and offering just as many
> differing reasons for any failures.
> But where is the evidence that you/me or the other 10000 of us have a snowballs chance in hell to return a consistent profit.
> 
> 90% according the evidence I have on trader success-----fail---longer term.
> So those who adopt the two ideas above would be in that lot.
> I presume---(although I don't have the evidence) that some of the 10% also reside there.
> 
> So If I'm going to be in that 10% or have ambitions of being there
> Id want Evidence---not just a belief that has been touted around for years---works.




 Buffett gave a lecture in 1984 titled "Superinvestors of Graham-and-Doddsville". 
I just googled it and the copy from Columbia uni have the charts as evidence of the results achieved by the 9 students of Graham and Dodd that he personally knew of and worked with.

Of the 9 investors, Buffett showed their results achieved over 20 to 30 years, and all nine managed to produced compounded annual growth of some 20% to 28%.

What's more, they all achieve it buying different stocks. Some of the fund buy entire businesses as well as smaller numbers of stocks, some just buy stocks and took no control or influence over management.

I don't think you can look at results like that and call it luck, or that those few guys are just geniuses no one else can hope to emulate.

---

As an aside... there could be a misperception that Value investing is pure data driven, just the figures and no quality or qualitative analysis. The biggest misunderstanding, to my mind anyway, is the belief that the reported figures as collated by the research houses are all right and true and so effort should be towards predicting the future - be that interest rates or momentum or whatever. 

It's very comfortable to believe that since value investing is about the figures and all figures are the same as reported and so all that's needed is to scan for ratios and mechanically hit to big time.


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## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> ...
> Evidence suggests that over the short term, price is difficult to predict and governed much more by investor risk preferences. However over the long term, investment securities can be expected to return a value approximate to their long term stream of cash flows (which can be forecast). So both matter.
> ...




Not really.

While it's true that the market price cannot be predicted in the short term, it also follow that the price cannot be predicted in the long term too. Just logic.

It's wrong to say that over the long term, the value will be corrected. That's nonsense.

Over the long term, perhaps the market may come to agree with your assessment and upgrade or "correct" their pricing much more aligned to the fundamentals of the company - reflecting its true value in the long run. 

But that is very different from saying that over the long term, we'll be right, or the market will be right. It may, it may not.

---

That is, when you estimate the approximate value of the company, your estimate is not that the price will be X in two years' time or 5 years' time etc. Your estimate is that its value is X to Y right now... and in time, the market will see that - you hope.

When the market sees and agrees with you, say in 2 years time... the value of the company maybe have changed, may stay the same, or may have deteriorated. At that point, you must look to determine which condition it is in. 


Example. Say I value company A at $10. It is now selling at $5. So I buy it for $5.
In two years' time the price went to $10. It does not automatically follow that $10 is fair value, or that my value has fully realised.  The company may have won a few big contracts, may be become more efficient, new markets or sanctions have been lifted and it's expanding... So no, $10 is not fair value. 

The reserve could happen. That condition is terrible and it's about to be known by everyone. So $10 is really pushing it. etc. etc.


To think that in the long term the value will be realised tend to lead to buying now for unknown future possibilities.


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## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> Not really.
> 
> While it's true that the market price cannot be predicted in the short term, it also follow that the price cannot be predicted in the long term too. Just logic.
> 
> It's wrong to say that over the long term, the value will be corrected. That's nonsense.
> 
> Over the long term, perhaps the market may come to agree with your assessment and upgrade or "correct" their pricing much more aligned to the fundamentals of the company - reflecting its true value in the long run.
> 
> But that is very different from saying that over the long term, we'll be right, or the market will be right. It may, it may not.
> 
> ---
> 
> That is, when you estimate the approximate value of the company, your estimate is not that the price will be X in two years' time or 5 years' time etc. Your estimate is that its value is X to Y right now... and in time, the market will see that - you hope.
> 
> When the market sees and agrees with you, say in 2 years time... the value of the company maybe have changed, may stay the same, or may have deteriorated. At that point, you must look to determine which condition it is in.
> 
> 
> Example. Say I value company A at $10. It is now selling at $5. So I buy it for $5.
> In two years' time the price went to $10. It does not automatically follow that $10 is fair value, or that my value has fully realised.  The company may have won a few big contracts, may be become more efficient, new markets or sanctions have been lifted and it's expanding... So no, $10 is not fair value.
> 
> The reserve could happen. That condition is terrible and it's about to be known by everyone. So $10 is really pushing it. etc. etc.
> 
> 
> To think that in the long term the value will be realised tend to lead to buying now for unknown future possibilities.




Completely regardless of what price you value some security at, the long term (hint, long term means a lot longer than 2 years) returns on any given security will be approximately equal to the stream of cash flows associated with that security. 

*Just logic.*

The way you misinterpreted my statement and got into an argument with yourself about the misinterpretation is very cute.


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## galumay

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> Example. Say I value company A at $10. It is now selling at $5. So I buy it for $5.
> In two years' time the price went to $10. It does not automatically follow that $10 is fair value, or that my value has fully realised.  The company may have won a few big contracts, may be become more efficient, new markets or sanctions have been lifted and it's expanding... So no, $10 is not fair value.
> 
> The reserve could happen. That condition is terrible and it's about to be known by everyone. So $10 is really pushing it. etc. etc.




As sinner says, 2 years is not a realistic time scale, none the less you seem oblivious to the obvious point that the very events you postulate impacting upon the price do so because in the long term they will change the free cash flow to the business, which as we know is what detirmines a companies value in the long term! 

Obviously value is dynamic and its necessary to revist valuations and check for potential impacts both positively and negatively on free cash flow. 

I also personally think of value as range rather than a point, I am not sure how anyone believes its possible to calculate value of a company to a specific point, given the variability of a number of the assumptions required.


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## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> Completely regardless of what price you value some security at, the long term (hint, long term means a lot longer than 2 years) returns on any given security will be approximately equal to the stream of cash flows associated with that security.
> 
> *Just logic.*
> 
> The way you misinterpreted my statement and got into an argument with yourself about the misinterpretation is very cute.




What does "say, 2 years" mean? 2 years? Or any point in time, but let say it's two year for sake of argument.

What does "say, $10" mean? Exactly 10 dollars even though I was using it in an example of an unknown company?

Ok then.

---

Cute or not, a smart person wouldn't pay for today what is essentially tomorrow's prices. Not literally "tomorrow" yea? 

I know it's a hard concept to understand, with discounting back to the present and all... but you do realise that, even with DCF, you are discounting back to the present... to the now. Given that that's what you're trying to do, how then can you go and say the price you're working out from DCF or anything is not meant for the now, but for the long term because in the long term it will work out as you predicted.

Then in the long term it work out as you predicted, but then you say not really because things change.

Like I said, if I'm a consultant or a hired help... I'll believe these nonsense too. Not only that, I'll tel the boss I need a couple more consultants to look at the US market, the European market, then the EU central banks, the Fed... Then build a team, then report weekly on prices I've forecast.

Wow man... I'll be really impressed when people tell me they've put hours and hours into predicting tomorrow's prices, today... then by lunch time tell me tomorrow's prices is now this lunchtime's price... then when tomorrow come tell me the price is actually tomorrow tomorrow...


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## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



galumay said:


> As sinner says, 2 years is not a realistic time scale, none the less you seem oblivious to the obvious point that the very events you postulate impacting upon the price do so because in the long term they will change the free cash flow to the business, which as we know is what detirmines a companies value in the long term!
> 
> Obviously value is dynamic and its necessary to revist valuations and check for potential impacts both positively and negatively on free cash flow.
> 
> I also personally think of value as range rather than a point, I am not sure how anyone believes its possible to calculate value of a company to a specific point, given the variability of a number of the assumptions required.




So you spend countless hours predicting cash rates and all that to come to a range of value. Then if it turn out right or wrong or really wrong or really right... how do you know what causes it to be right or wrong? You got like half a dozen variables that could have cause it - and that's just on your modelling alone.

The earnings might be up, why? Interest rates? maybe. Greek crisis? No? New competitor? All of them? To what degree?

So DCF asks you to be precise, but then you can't be. But let's do it anyway.


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## howardbandy

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Hi Tech/a, and all --

I am one of the people in your short list.  

I can reaffirm my strong interest in "evidence based" trading system development.  A search for the definition of "evidence based" returns references mostly to medical studies and medical practice.  So I'll go with your first request -- "rigorously tested."

Rigorously tested, as applied to analysis of trading systems and to my thinking, implies application of high quality modeling and simulation techniques, including out-of-sample testing.  As such, rigorous analysis begins with statements of intent and metrics by which performance will be measured, definitions of risk tolerance limits acceptable to the trader, analysis techniques that provide many out-of-sample data points, and guidelines for trading management.      

I believe you have copies of some or all of the five books I have written recently, all devoted to trading system development, all showing examples that are rigorously tested.  Over 60,000 copies in circulation as of January 2015.  Each book has its own website.  Begin here:
http://www.blueowlpress.com/WordPress/2-column/

The best single book is my latest:
"Quantitative Technical Analysis"
http://www.quantitativetechnicalanalysis.com/
or
http://www.amazon.com/Quantitative-...?ie=UTF8&qid=1437055735&sr=8-1&keywords=bandy

I have made several presentations to organizations including Australia Technical Analyst's Association, International Federation of Technical Analysts, and Market Technician's Association, all describing rigorously tested development theory and techniques.  Many have been posted.  
Try this specific search:
Google Bandy YouTube
or this more general search:
Google Howard Bandy
or begin here:
http://www.blueowlpress.com/WordPress/grid/

Speaking specifically to your search for "papers."  Papers, to me, implies academic quality publications.  I am a retired university professor and dean.  The academic community has been very slow to accept that trading is a reasonable alternative to long holding period investing, and papers related to technically based trading that pass academic filters are scarce.  There are papers related to use of fundamental analysis in investment, but my own research and experience suggests to me that none of those techniques pass validation.  Consequently, papers describing applications that are useful to us retail traders that have rigorous analysis will be scarce.

I read in earlier responses in this thread to techniques such as Fibonacci, Elliott, Gann, etc.  These are all ill defined, require subjective evaluation, and are prone to revision as additional data is received.  None pass rigorous testing or statistical validation.

Long term holding exposes the position to risk greater than most trades can tolerate.  (My QTA book discusses risk related to holding period.  My July 15, 2015, presentation to the IFTA entitled "The Four Faces of Risk" will be posted to YouTube shortly.)

In my opinion, techniques that have the highest possibility of passing rigorous testing have the following characteristics:
Are based on clear rules.
Trade frequently.
Hold a short period.
Have a high ratio of winners to losers.
Adjust position size dynamically as the model and data move in and out of synchronization.

Best regards,
Howard


----------



## galumay

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> So you spend countless hours predicting cash rates and all that to come to a range of value. Then if it turn out right or wrong or really wrong or really right... how do you know what causes it to be right or wrong? You got like half a dozen variables that could have cause it - and that's just on your modelling alone.
> 
> The earnings might be up, why? Interest rates? maybe. Greek crisis? No? New competitor? All of them? To what degree?
> 
> So DCF asks you to be precise, but then you can't be. But let's do it anyway.




I think craft is right, you just dont read what other people write, then you reflect back something entirely different, and argue against that. Its very odd! 

I am going to follow his example in the other thread and leave you to it, good luck with what ever it is you do!

On topic, I think evidence based paper that show methods dont work are more common than the reverse, so might be slim pickings. Nearly everything I have seen is not of rigorous academic standard, its just dressed up to look like it!


----------



## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Hot off the press

Authors: Fan, Opsal, Yu
Title: Equity Anomalies and Idiosyncratic Risk Around the World
Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2611047


> In this study, we examine how idiosyncratic risk is correlated with a wide array of anomalies, including asset growth, book-to-market, investment-to-assets, momentum, net stock issues, size, and total accruals, in international equity markets. We use zero-cost trading strategy and multifactor models to show that these anomalies produce significant abnormal returns. The abnormal returns vary dramatically among different countries and between developed and emerging countries. *We provide strong evidence to support the limits of arbitrage theory across countries by documenting a positive correlation between idiosyncratic risk and abnormal return. It suggests that the existence of these well-known anomalies is due to idiosyncratic risk. In addition, we find that idiosyncratic risk has less impact on abnormal return in developed countries than emerging countries. Our results support the mispricing explanation of the existence of various anomalies across global markets.*


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



galumay said:


> I think craft is right, you just dont read what other people write, then you reflect back something entirely different, and argue against that. Its very odd!
> 
> I am going to follow his example in the other thread and leave you to it, good luck with what ever it is you do!




I'm sure Sinners happy with that




> On topic, I think evidence based paper that show methods dont work are more common than the reverse, so might be slim pickings. Nearly everything I have seen is not of rigorous academic standard, its just dressed up to look like it!




Not looking for right OR wrong.

Some great stuff so far
I'll have a chance to digest over the weekend.
Appreciate any and all replies.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



galumay said:


> I think craft is right, you just dont read what other people write, then you reflect back something entirely different, and argue against that. Its very odd!
> 
> I am going to follow his example in the other thread and leave you to it, good luck with what ever it is you do!
> 
> On topic, I think evidence based paper that show methods dont work are more common than the reverse, so might be slim pickings. Nearly everything I have seen is not of rigorous academic standard, its just dressed up to look like it!




Maybe I read *into* what people are saying. That I know what they're implying.

Anyway, by the sound of it you guys think that DCF is simply about plugging in some rates and variables that's been forecasted and neatly worked out by some genius somewhere. All it need is just to add the earning reported and a couple scenario.

And man... all I have done is simply repeat and rephrase what Graham wrote and presumably taught and use himself. But ey, 30 years later he changed his mind... and the 30 years before that all his students were just lucky.

And no, I do not imply that I am his student or a genius or that I will be anywhere as successful as some of them have been. There is such as thing in investing as opportunity.


----------



## howardbandy

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Greetings --

Regarding:
On topic, I think evidence based paper that show methods dont work are more common than the reverse, so might be slim pickings. Nearly everything I have seen is not of rigorous academic standard, its just dressed up to look like it! 

----------------

If rigorous analysis of a technique shows something does not work, you are comfortable with the assumptions of the study, you can and do replicate the analysis the paper reports, then it probably does not work.  Changing the analysis to less rigorous will not make it more likely that the technique works.

Slim pickings is accurate.  This is a difficult problem.  As Daniel Kahneman writes so well in "Thinking, Fast and Slow," we are all experts at fooling ourselves.  We see what we hope to see, ignoring facts and rational conclusions as necessary.

Best regards,
Howard


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



> We are all experts at fooling ourselves




How true that is in many areas.


----------



## Value Collector

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



I think you would get alot out of this book Tech, as I said in the other thread, F/A is not just about formulas and ratios, you really need to have a good head for business, not just a proper understanding of the individual businesses you are looking at, but you need to understand general business and investment fundamentals.

This book is a compilation of Buffetts letters and Essays from over the years, all broken down and organised into cateregories, I think if you have a read of this you will get an idea of the way his brain works, and you will see his success is not down to a valuation formula or ratios, but rather a deep passion for business, a deep understanding of accounting, and a solid foundation of security analysis. 

Anyone that tries to teach you the "Buffett formula" is leading you up the garden path.

The book is called.

The essays of Warren Buffett, lessons for investors and managers.


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Thanks for the recommendation
I like the format.
Will grab it.


----------



## craft

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

I’m not sure how Buffett or most of F/A in general fits into an evidence based thread.  Assuming we are looking for evidence to a scientific standard. 

Certainly Buffett & Co and there are long term successful T/A exponents as well provide enough evidence to nullify the efficient market hypothesis.  But there is no evidence I have ever seen of what does work every time.  

Most of the papers approach things from the perspective of showing the lowest deciles beat the highest deciles or such & such approach beats buy& hold – none of it is really aimed at testing hypotheses by looking for nullifying evidence. If you approached it this way every concept I know of would be nullified because none of it is underpinned by an ironclad law. 

What the academic literature shows is “generalities”  of things that tend to work on a probability basis.  Some papers go to the level of confidence levels to try and ensure the observed generality is not a random occurrence but even a 95% confidence that an observation is not random is far different from collecting evidence to nullify a hypothesis.

The better generalities have appeared again & again over many papers, many markets and many timeframes, but how stable they will be into the future as people try to harvest them will be the big question. My suspicion is only the hardest (least cost effective or psychologically difficult) to harvest will survive.

Deciphering quantitative evidence in F/A is harder than T/A because you have the language of accounting defining a lot of the terms whereas price is pretty straight forward.  So even if you get a confidence level that a F/A generality exists you have to be mindful of the underlying definition of the variable.

Here is a good summary of some generalities that have been persistent. (But none of it is sufficiently evidence based in my opinion – so not sure it fits this thread).

http://www.tweedy.com/resources/library_docs/papers/WhatHasWorkedFundOct14Web.pdf

My main interest around the concept of evidence based is how people cope once they see holes in the beliefs that used to fortify their involvement in the market.  Do they look for new beliefs or can they still embrace the market in the face of their uncertainty.  Not a lot seem to make the step into coping with true uncertainty, they keep looking for another belief to trust in or refortify their existing beliefs in the face of nullifying evidence.


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



> I’m not sure how Buffett or most of F/A in general fits into an evidence based thread. Assuming we are looking for evidence to a scientific standard.




Thought it would be a good read--didn't and don't expect it to have any relevance to the thread.



> Certainly Buffett & Co and there are long term successful T/A exponents as well provide enough evidence to nullify the efficient market hypothesis. But there is no evidence I have ever seen of what does work every time



.

I've not seen evidence myself in a great deal of both methods even that which works more than 50% of the time---*lots of belief!*

According to the academics I know --- all is not necessarily lost.
Personally I feel to tools necessary to answer even some of the simplest generalities aren't readily available or available to the masses like myself who isn't a Howard Bandy!---Howards made a great start.

I don't think like Howard thinks.
I don't know what to group together to actually have a half a chance of defining an answer to many of my trading ideas/questions---all I have are suspicions---from experience in many cases.

I don't have the knowledge or the tools at my disposal to come close to a determination.
I don't know what those tools are and even if I did it would be like hopping in a Jumbo Jet and pointing me to the run way.----want to fly with me??

 Talking to watching and discussing things with my in house quant just shows me how cavernous that divide is ----- to know what these guys know would be awesome. *They actually-------"Know what you/they need to know!!!"*


I think academia can show us ---*DIRECTION*.
I really don't think its up to academia to provide results.
One day the likes of Howard will bring academia to the likes of myself so *I CAN* answer my questions and prove or dispel my theories, and guide me toward that which I truly need to know---*EVALUATION*

Yet over 20 yrs trading I'm net Profitable.

A great chunk came by remarkable luck catching a 7 yrs bull market

But I've come to the conclusion I'm trend biased---if I get it (trend) Ill profit.
luck will truly be with me.

It must trend often with good range.

I need something that once it trends it trends strongly and is not likely to look back--Long and Short.
I want one instrument----Personally I find it more than difficult to replicate 2/3/4 in the same way.
I need a high win rate and a strong Reward to Risk.

This in trading I've been able to "Know"---evidenced from experience and result.

The DAX---for me-- ticks the boxes.


----------



## DeepState

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



craft said:


> My main interest around the concept of evidence based is how people cope once they see holes in the beliefs that used to fortify their involvement in the market.  Do they look for new beliefs or can they still embrace the market in the face of their uncertainty.  Not a lot seem to make the step into coping with true uncertainty, they keep looking for another belief to trust in or refortify their existing beliefs in the face of nullifying evidence.




What do you do with your own investment research?  Aren't your investment conclusions based on a set of beliefs, supported by data and a framework of thought that combines them?  If these are never fully certain and subject to ongoing development, what do you do when the facts as you knew them change with the arrival of unexpected information or your understanding of how you combine them changes?  Generally speaking, the appropriate step to take is to act in accordance with what you believe to be true now, which may include leaving a wide(r) margin for error.  You'd be familiar with what Keynes had to say about what to do when 'facts' change (in which case they were never really facts, but beliefs).

This is the same deal with the investment models which are created, tested against data and modified in light of evidence.  When data contradicts a belief entirely, the belief must be discarded.  If it is somewhat inconsistent, then you apply judgment, or reach for things like Maximum Likelihood estimation, Bayesian Adjustments, thresholds for rejection vs another hypothesis, or simply guess about what the right thing to do with your understanding of the world should now be.

As to coping with true, pervasive, uncertainty from a research perspective, you really can't. No margin for error is large enough to allow for it unless you know the bounds within which it is uncertain.  Nothing can be proved conclusively or not if the idea under investigation is dominated by true uncertainty.  Sure, you can get observational outcomes and some of these may produce stuff which meets some stats tests and have '***  (Significant at P = 0.01)' next to them.  However, in a fully uncertain situation, you can't put too much weight on these outcomes.  The more correct thing to say is "don't really know what this observation means" to any observation drawn from a fully uncertain situation.  That would make for seriously boring copy...or otherwise be an excellent argument for indexing, in some ways.

As to confirmation bias, or otherwise making your career on an 'anomaly' (Shiller) or explaining it away via a risk exposure (FAMA), why should that behaviour be so surprising?  You get Nobel Prizes and tenure for doing that. It also fills about 80% of the thread volume here.  Where would ASF be without it?


----------



## craft

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



DeepState said:


> What do you do with your own investment research?  Aren't your investment conclusions based on a set of beliefs, supported by data and a framework of thought that combines them?  If these are never fully certain and subject to ongoing development, what do you do when the facts as you knew them change with the arrival of unexpected information or your understanding of how you combine them changes?  Generally speaking, the appropriate step to take is to act in accordance with what you believe to be true now, which may include leaving a wide(r) margin for error.  You'd be familiar with what Keynes had to say about what to do when 'facts' change (in which case they were never really facts, but beliefs).
> 
> This is the same deal with the investment models which are created, tested against data and modified in light of evidence.  When data contradicts a belief entirely, the belief must be discarded.  If it is somewhat inconsistent, then you apply judgment, or reach for things like Maximum Likelihood estimation, Bayesian Adjustments, thresholds for rejection vs another hypothesis, or simply guess about what the right thing to do with your understanding of the world should now be.
> 
> As to coping with true, pervasive, uncertainty from a research perspective, you really can't. No margin for error is large enough to allow for it unless you know the bounds within which it is uncertain.  Nothing can be proved conclusively or not if the idea under investigation is dominated by true uncertainty.  Sure, you can get observational outcomes and some of these may produce stuff which meets some stats tests and have '***  (Significant at P = 0.01)' next to them.  However, in a fully uncertain situation, you can't put too much weight on these outcomes.  The more correct thing to say is "don't really know what this observation means" to any observation drawn from a fully uncertain situation.  That would make for seriously boring copy...or otherwise be an excellent argument for indexing, in some ways.
> 
> As to confirmation bias, or otherwise making your career on an 'anomaly' (Shiller) or explaining it away via a risk exposure (FAMA), why should that behaviour be so surprising?  You get Nobel Prizes and tenure for doing that. It also fills about 80% of the thread volume here.  Where would ASF be without it?




I’m not sure if you want me to answer those first two questions because the rest of the post basically answers it.

Embracing uncertainty gives you the mindset and flexibility to work on improving your guesses and fixing your bad ones. Charlie Munger allegedly responded about Berkshire success. Because our guesses are better than yours.   Says it all about the right mindset IMO. Guesses can be educated or experience backed but guesses they are.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



craft said:


> I’m not sure how Buffett or most of F/A in general fits into an evidence based thread.  Assuming we are looking for evidence to a scientific standard.




Let me get this straight...

The world's most successful investor - Buffett - just told you that 8 investors he personally know, many of whom he had worked with, all of whom he know for a fact learn from the same two teachers and apply, with very little modification, the same set of principles... and all of these nine all run different fund, all pick different stocks (with very few overlap, and no coordination among them)... and all of them managed to produce annualised, compounded returns of 20% or over for at least 20 years up to when the lecture was given...

And that is not "scientific" proof enough? Those successes are not evidenced enough to meet your strict criteria of scientific inquiry?

Seriously?

OK... how about the simple idea of looking for a $1 value and only ever pay 50 cents for it?

If you set out to find a buck but will only buy it for half that, there need to be convincing evidence whether or not that will make you profit?

Whatever happen to just accepting the word of the guy with $70 billion or something?


----------



## wayneL

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> Let me get this straight...
> 
> The world's most successful investor - Buffett - just told you that 8 investors he personally know, many of whom he had worked with, all of whom he know for a fact learn from the same two teachers and apply, with very little modification, the same set of principles... and all of these nine all run different fund, all pick different stocks (with very few overlap, and no coordination among them)... and all of them managed to produce annualised, compounded returns of 20% or over for at least 20 years up to when the lecture was given...
> 
> And that is not "scientific" proof enough? Those successes are not evidenced enough to meet your strict criteria of scientific inquiry?
> 
> Seriously?
> 
> OK... how about the simple idea of looking for a $1 value and only ever pay 50 cents for it?
> 
> If you set out to find a buck but will only buy it for half that, there need to be convincing evidence whether or not that will make you profit?
> 
> Whatever happen to just accepting the word of the guy with $70 billion or something?




Notwithstanding the sense of "value" investing, how Buffet and his ilk does things bear no relation to an individual private investor.

Suggested reading.... Freakonomics and Fooled by Randomness.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Maybe it's true... investing is very very, very very hard.

Here's a word from our sponsor:


Hello. 
At Master of the Universe Mutual we know how hard it is for you to invest money. That's why we only select the best and the brightest - It is who we reject that makes us the best.

We have Subject-Matter Experts from all fields - Nobel Laureates in economics, in finance, in history, in political science. We have MBAs, Master of this and all that. We got graduates from Oxford and Harvard and Yale... and those "MBA" from UNSW... they can bring us tea and coffee and dust our Bloomberg and FactSet before we even look at them.

Look around you - here are our latest Bloomy - all 12 screens of them per terminal - we've personally added a few extra carbon footprint to Mother Nature with those. Here's our datacentre with state of the art fibre connected to London, Paris, New York and directly injected into our analysts brainstem - why? Because information is power, and the more data you got, the more information you have - obviously!

I know what you're saying... It's all very impressive, but what about the results?

Well, here they are. Take a look.

Yes we know, it suck egg. Underperforming a simple do-nothing Index pretty much every year; Losing hundreds of billions of people's life savings into one toxic asset and financial scam and corporate bankruptcy.. one after another. It suck so bad even a monkey throwing darts have done better. But are you a monkey? Don't think so.

So ask yourself... if we're so smart, so rich, and have all these resources... and we still can't do our job properly. What on Earth make you think you could? Are you smarter than us? If you're so smart why aren't you rich ey? ey!

So give us your savings, let us play with it. You know you want to. It's one way to not blame yourself when you lose it all on trying to be a Warren Buffett or a business person studying annual reports like it contain anything useful we don't already know.

---

So, who do I give my money to and how will they take my two percent?


----------



## History Repeats

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Expected Returns by Antti Ilmanen. And hundreds of reference paper included inside. The author one of the best in its field and a practitioner not academic. It will be a long read, require understanding of asset pricing theory but no maths involved in the book .


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



wayneL said:


> Notwithstanding the sense of "value" investing, how Buffet and his ilk does things bear no relation to an individual private investor.
> 
> Suggested reading.... Freakonomics and Fooled by Randomness.




No relation to individual investor?

Why is that? Because they are Gods and we are mere mortals?

Don't take what I'm saying to mean that anyone can be Buffett; or anyone who read Graham will be Buffett or Munger or his pals. 

A bit of intellect and common sense aside, there's the question of hard work, interests and luck involve in successful investing. 

I'm not fooling myself or anyone and say that investing is easy. It takes a lot of work to understand a business, takes a lot of effort and motivation when you have little capital and no time, but it's absurd to think that another human being could do something and the rest could not because we're not made for it.


----------



## wayneL

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

......fooled by randomness.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



wayneL said:


> ......fooled by randomness.




Pick a company with a business you could understand.

Read its reports and account.

Read into its industry and competitors.

See if the company is going to go broke. See how it has been doing. See what are its assets and liabilities. See how its returns has been.

Estimate its position in relation to the industry. Have an idea of how its future would work out - will it still survive, will it go broke...

Then estimate its approximate value.

Buy below those estimates.

---


Not easy. Not effortless. Not always possible to find business you know and like and sell at a good price.

But not exactly Rocket Science either.


----------



## craft

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> Pick a company with a business you could understand.
> 
> Read its reports and account.
> 
> Read into its industry and competitors.
> 
> See if the company is going to go broke. See how it has been doing. See what are its assets and liabilities. See how its returns has been.
> 
> Estimate its position in relation to the industry. Have an idea of how its future would work out - will it still survive, will it go broke...
> 
> Then estimate its approximate value.
> 
> Buy below those estimates.
> 
> ---
> 
> 
> Not easy. Not effortless. Not always possible to find business you know and like and sell at a good price.
> 
> But not exactly Rocket Science either.




That's a a theory - so is buy low sell high. Wahoo for profitable theories

But how goes the application? Made your millions yet?


----------



## craft

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



History Repeats said:


> Expected Returns by Antti Ilmanen. And hundreds of reference paper included inside. The author one of the best in its field and a practitioner not academic. It will be a long read, require understanding of asset pricing theory but no maths involved in the book .





There's a free summary of this book available (180pages)

http://www.cfapubs.org/doi/pdf/10.2470/rf.v2012.n1.1


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



craft said:


> That's a a theory - so is buy low sell high. Wahoo for profitable theories
> 
> But how goes the application? Made your millions yet?




Not yet, but would have made 10% on MTS this week though.

MTS is not of the quality I like - probably about half as good as WOW on some measure. But WOW is not yet at a bargain level I'm happy with at $27 last week - though at that price it is very reasonable.

Sometime luck just don't go your way for the price drop lower, but are you going to tell me I'll average losses over my investing career if I approach it as a business following Graham's advise like this?

I know I won't know everything, and luck might not be on my side with businesses I could come to know... but it's no rocket science and no master of the universe wisdom required.


----------



## Value Collector

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



craft said:


> I’m not sure how Buffett or most of F/A in general fits into an evidence based thread.  Assuming we are looking for evidence to a scientific standard.
> 
> Certainly Buffett & Co and there are long term successful T/A exponents as well provide enough evidence to nullify the efficient market hypothesis.  But there is no evidence I have ever seen of what does work every time.
> 
> Most of the papers approach things from the perspective of showing the lowest deciles beat the highest deciles or such & such approach beats buy& hold – none of it is really aimed at testing hypotheses by looking for nullifying evidence. If you approached it this way every concept I know of would be nullified because none of it is underpinned by an ironclad law.
> 
> What the academic literature shows is “generalities”  of things that tend to work on a probability basis.  Some papers go to the level of confidence levels to try and ensure the observed generality is not a random occurrence but even a 95% confidence that an observation is not random is far different from collecting evidence to nullify a hypothesis.
> 
> The better generalities have appeared again & again over many papers, many markets and many timeframes, but how stable they will be into the future as people try to harvest them will be the big question. My suspicion is only the hardest (least cost effective or psychologically difficult) to harvest will survive.
> 
> Deciphering quantitative evidence in F/A is harder than T/A because you have the language of accounting defining a lot of the terms whereas price is pretty straight forward.  So even if you get a confidence level that a F/A generality exists you have to be mindful of the underlying definition of the variable.
> 
> Here is a good summary of some generalities that have been persistent. (But none of it is sufficiently evidence based in my opinion – so not sure it fits this thread).
> 
> http://www.tweedy.com/resources/library_docs/papers/WhatHasWorkedFundOct14Web.pdf
> 
> My main interest around the concept of evidence based is how people cope once they see holes in the beliefs that used to fortify their involvement in the market.  Do they look.




I guess it depends on what you are looking for to test

As I said, if you are looking to test some formula or ratio, I think you are missing the point.

But I think being a good investor is akin to being a good lawyer. can we scientifically prove some lawyers are better than others, or that some strategies employed by laywers are better than others, probably.

Does it mean it's easy to replicate the performance, probably not, does it mean that with the correct study to develop a knowledge base, combined with certain strategies for picking clients and using certain strategies to approach cases that you can become a good lawyer, I think you can.

Picking any one aspect of a good lawyer will not make you great, same with being an investor, it takes a lot of knowledge, as well as having practicle strategies.

Trying to find evidence to prove whether settleing out of court beats going to trail, or whether tax law beats criminal law etc seems pointless to me. As I said earlier, I think success in f/a comes from deep understanding of business and investment principles that can't be judged or employed in isolation.


----------



## howardbandy

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Greetings --

Commenting on this paragraph --

As to coping with true, pervasive, uncertainty from a research perspective, you really can't. No margin for error is large enough to allow for it unless you know the bounds within which it is uncertain. Nothing can be proved conclusively or not if the idea under investigation is dominated by true uncertainty. Sure, you can get observational outcomes and some of these may produce stuff which meets some stats tests and have '*** (Significant at P = 0.01)' next to them. However, in a fully uncertain situation, you can't put too much weight on these outcomes. The more correct thing to say is "don't really know what this observation means" to any observation drawn from a fully uncertain situation. That would make for seriously boring copy...or otherwise be an excellent argument for indexing, in some ways.

---------

Evidence-based (read Bayesian) techniques provide measurable confidence given several criteria:

There are well defined rules for identifying the patterns that precede profitable trades.
Those rules are tuned using data mining techniques over in-sample data.
There are many examples of similar patterns in out-of-sample data.  
The period of time spanned by the in-sample plus out-of-sample period provides a stationary distribution of patterns and trades.
The trades signaled in the out-of-sample period are profitable.

Read about it in "Quantitative Technical Analysis."

On the other hand, as several posters have pointed out, too much of what we hear as being evidence-based is seriously flawed.  It suffers from too few examples, in-sample only analysis, selection bias, confusing a bull market with brains, etc.

In order to pass rigorous testing, there must be many confirming examples detected without bias in strictly out-of-sample data.

Buffett, etal, have superb results, but they are not evidence-based.  No fundamentally-based techniques can be.  Out-of-sample tests are not practical -- there are too few examples.  The problems with data granularity, delay between achieving a result and posting the result, bias introduced by the reporting agency, etc, cannot be overcome.  

Belief, yes.  Confidence, no.

Best regards,
Howard


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



craft said:


> That's a a theory - so is buy low sell high. Wahoo for profitable theories
> 
> But how goes the application? Made your millions yet?




Exactly

These are but two of 100s

It appears that people want to believe these theories and even defend them
Rather than investigate their veracity.


----------



## wayneL

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> Pick a company with a business you could understand.
> 
> Read its reports and account.
> 
> Read into its industry and competitors.
> 
> See if the company is going to go broke. See how it has been doing. See what are its assets and liabilities. See how its returns has been.
> 
> Estimate its position in relation to the industry. Have an idea of how its future would work out - will it still survive, will it go broke...
> 
> Then estimate its approximate value.
> 
> Buy below those estimates.
> 
> ---
> 
> 
> Not easy. Not effortless. Not always possible to find business you know and like and sell at a good price.
> 
> But not exactly Rocket Science either.




You think that's all there is to Buffets success?


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



wayneL said:


> You think that's all there is to Buffets success?




1 Buffett

Possibly 100s of Thousands of followers of the Buffett Principal.

Where are all the NEW Buffetts?


----------



## satanoperca

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> 1 Buffett
> 
> Possibly 100s of Thousands of followers of the Buffett Principal.
> 
> Where are all the NEW Buffetts?




Staying below the radar.

I always see successful people in two boats :
1. They want everyone to know their success and tell the world
2. They prefer to remain quiet and get on with business.

I am sure there are 100's of successful traders and investors to varying degrees, out there getting on with business.


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



satanoperca said:


> Staying below the radar.
> 
> I always see successful people in two boats :
> 1. They want everyone to know their success and tell the world
> 2. They prefer to remain quiet and get on with business.
> 
> I am sure there are 100's of successful traders and investors to varying degrees, out there getting on with business.




I'm sure there are
But New Buffets would be conspicuous particularly any number of them.

It appears Buffet principals are championed by budding Buffets rather than
New Buffets. Personally I think it's a tremendously logical principal.
Unfortunately logic regularly under performs expectation.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



wayneL said:


> You think that's all there is to Buffets success?




It's not Buffett's. It's Graham's.

That was just one chart to show a straightforward application of Graham's formula - to put performance and estimates in perspective. So that's not all there is to it, but it work wonders for me.

----

Investing success is not a straight forward if this then that. It's a holistic understanding of the business and its environment - something that will take time to develop, and take a lot of hardwork to get to.

If you ask me, the "secret" to investing success has been out of the bag for at least 70 years. An investor's focus shouldn't be on what's the trade secret but on simply studying businesses and that's it. Everything else is just a bunch of highly placed people who doesn't know what they're doing, and geniuses who's paid to find new innovation and "scientific" evidence and make life easier and risk-free for established institutions to make money off of clients for no real work.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> I'm sure there are
> But New Buffets would be conspicuous particularly any number of them.
> 
> It appears Buffet principals are championed by budding Buffets rather than
> New Buffets. Personally I think it's a tremendously logical principal.
> Unfortunately logic regularly under performs expectation.




Mate, aren't you the one who ask for evidence if FA or TA works?

When it's shown, you then say people are showing off?

Have I say how much money I have made or how much I got at the bank?
When asked how's the application of this works for me, didn't I just show it have and would work pretty well. That's not another piece of evidence?


Proof is quite simple. Why not just pick any 8 or 9 Technical Analysis investor or fund manager with the same kind of performance records as the 9 Buffett show and that's it.


----------



## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> Maybe I read *into* what people are saying. That I know what they're implying.






I guess that is the problem here, we have all been respectful enough to listen and take on your comments as would be appropriate when holding discussion with other adults, while you have an argument with yourself about the things you think others are implying.

I guess it's over for me once the thread devolves from luutzu arguing with successful investors about why they can't estimate the value of a firm, into luutzu explaining to wayneL how easy it is to invest by estimating the value of a firm..sorry tech. Another thread bites the dust!



> Then estimate its approximate value.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> I guess that is the problem here, we have all been respectful enough to listen and take on your comments as would be appropriate when holding discussion with other adults, while you have an argument with yourself about the things you think others are implying.
> 
> I guess it's over for me once the thread devolves from luutzu arguing with successful investors about why they can't estimate the value of a firm, into luutzu explaining to wayneL how easy it is to invest by estimating the value of a firm..sorry tech. Another thread bites the dust!




When did I ever say it's easy?

I probably have said it's simple, but simple does not mean simplistic or easy.

How in the world do you think it's easy to understand a multi-disciplined, multi-million, billion dollar national and international corporation?

How could I anyone imply it's easy to be so certain that the entire market is wrong and I am right?

---
With regard to the application of Graham's formula:

Craft was being smug and ask how well have I apply that simplistic formula - and I showed him that simple idea in action. It does look like it work pretty well if you can read it. And that's just a straight forward, mechanical application - no adjustment, no analysis or thinking involved in that chart.

Did I say that is all, that's all you need to do? Read my reply to Wayne again.

But it does put all the market and the investor's thinking in perspective, doesn't it?

----

Let's take a look at DCF and see if it's designed to create jobs for academics and consultants and other prophets or design to be useful to otherwise intelligent adults not trained in fancy maths.





To the definitions:
Definitions of Terms


V0= Value of Equity (if cash flows to equity are discounted) or Firm (if cash flows to firm are discounted) 

CFt = Cash Flow in period t; Dividends or FCFE if valuing equity or FCFF if valuing firm. 

r = Cost of Equity (if discounting Dividends or FCFE) or Cost of Capital (if discounting FCFF) 

g = Expected growth rate in Cash Flow being discounted 

ga= Expected growth in Cash Flow being discounted in first stage of three stage growth model 

gn= Expected growth in Cash Flow being discounted in stable period 

n = Length of the high growth period in two-stage model 

n1 = Length of the first high growth period in three-stage model 

n2 - n1 = Transition period in three-stage model 
WHICH MODEL SHOULD I USE?

Use the growth model only if cash flows are positive
Use the stable growth model, if
the firm is growing at a rate which is below or close (within 1-2% ) to the growth rate of the economy
Use the two-stage growth model if
the firm is growing at a moderate rate (... within 8% of the stable growth rate)
Use the three-stage growth model if
the firm is growing at a high rate (... more than 8% higher than the stable growth rate)
SUMMARIZING THE MODEL CHOICES... 

more here: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/lectures/basics.html

----

Sure looks like a lot of work. 
Let's bring a few of them in and advise us of changes, all of the time.


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Sinner

Luutzu
Demonstrates brilliantly the lack of ability to understand what is needed to 
Determine if your method that you adopt to trade can be profitable----when you trade it.

Roger Federa wins tennis tournaments
So do  Andy Murray

And Rafael Nadal
 ---- so then can I ---- what more proof do you/I need!

Again I'm not looking for proof I'm looking for method used to demonstrate an evidence based result.

The exact opposite to that being offered up here.
It's this sort of logic that Joe Public Gobbles up and why 90 % fail.


----------



## History Repeats

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



craft said:


> There's a free summary of this book available (180pages)
> 
> http://www.cfapubs.org/doi/pdf/10.2470/rf.v2012.n1.1




You can get it online but i think worth the money to get the book.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> Sinner
> 
> Luutzu
> Demonstrates brilliantly the lack of ability to understand what is needed to
> Determine if your method that you adopt to trade can be profitable----when you trade it.
> 
> Roger Federa wins tennis tournaments
> So do  Andy Murray
> 
> And Rafael Nadal
> ---- so then can I ---- what more proof do you/I need!
> 
> Again I'm not looking for proof I'm looking for method used to demonstrate an evidence based result.
> 
> The exact opposite to that being offered up here.
> It's this sort of logic that Joe Public Gobbles up and why 90 % fail.




So why do you do your work the way it's done Tech? Did you learn it from somebody or it's all your own discoveries? How did you first make heads or tails of the charts?

Why do people, in general, go to school and university and just generally read and study? Just because someone else have done it, have discovered it, and now wrote it and it makes sense and it's what you want to do and pursue...why bother right? Just do what you were born to do, follow your endowment.

Come on man, you're much smarter than that. Trying to talk like that just to laugh at me ain't going to help your case.

---

Anyway, you are after a system right? A magic formula? One that you can plug numbers in or read the direction and reach El Dorado yea?

Get real man.

Think about it. Could there really be such a map, such formula where you plug in a few numbers neatly prepared for you, then sit back and watch it rain gold.

Lest I get accused of putting words in your mouth - saying "looking for papers on evidence based results..." - is looking for a proven system that works right?

And again, just in case I get accused of throwing up Graham's one shorthand approximation formula - note the word "shorthand", note the word "approximation" - that I am saying there is a magic formula and that's all there is to it... In case I am accuse of saying that, I do not.

anyway, let's do this again next year. It's going to be an annual thing.


----------



## cynic

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> ...Lest I get accused of putting words in your mouth - saying "looking for papers on evidence based results..." - is looking for a proven system that works right?
> ...



Not necessarily. 

The motivation for asking could be to demonstrate to others that there is a distinct lack of evidentiary support for deeply entrenched beliefs.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



cynic said:


> Not necessarily.
> 
> The motivation for asking could be to demonstrate to others that there is a distinct lack of evidentiary support for deeply entrenched beliefs.




Maybe. Just I doubt that's the case here.

I mean, the world's most successful investor have all along said this book, this approach, provide me with the principles and foundation and completely changed my life and my investing... and it also made great successes out of all the investors that I know and worked with... and we just listen and shrugged it off as them being real geniuses and only suckers would believe they too could learn the "secret".

What's the secret? Treat stock as ownership in an entire business man; Study the business man; Invest in what you know man; Work really hard and be really careful in case you're wrong man.

Seriously, when's the last time any one got rich by working hard to know what they're doing, and only does it if it is safe and won't kill them if it fail.



When you see and hear that and you're not satisfy with it, you're not looking for reason and understanding, you're looking for a system.


----------



## cynic

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> Maybe. Just I doubt that's the case here.
> ...



It's interesting that you say that.

I actually thought that my alternative was likely to be the case here, however, knowing that there certainly are other possibilities, I'd prefer not to make the error of automatically presuming the correctness of my opinions on the thoughts and/or motivations of others.



> ...
> When you see and hear that and you're not satisfy with it, you're not looking for reason and understanding, you're looking for a system.



Are systems and reason/understanding mutually exclusive?

If not, how could one arrive at such a conclusion?


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



cynic said:


> It's interesting that you say that.
> 
> I actually thought that my alternative was likely to be the case here, however, knowing that there certainly are other possibilities, I'd prefer not to make the error of automatically presuming the correctness of my opinions on the thoughts and/or motivations of others.
> 
> 
> Are systems and reason/understanding mutually exclusive?
> 
> If not, how could one arrive at such a conclusion?




If system is defined as a set of principles, as an approach, then it's not mutually exclusive.

But 'system' is not reason/understanding if it's simply a formula with variables to plug into.

Example. Say we turn on Google GPS maps to go somewhere. if we simply follow the direction as directed no matter what - then that's just a mechanical system with formula to follow - this case being that if they say left we turn left; if right turn right; if go straight we go straight even if there are no signs and road blocks warning of danger.

But if we follow a general principle approach, we would adapt, would input our own knowledge of main roads and short cuts to get to our destination.


---
I guess people just either take to it or they don't.

I think the problem with investing still being debated is because it's been transformed into some secondary and tertiary entity, and the focus is on understanding the new set of entities rather than the original form - yet studying the new form but thinking all form are the one and the same.

If you bring stocks down to its basic, its original form - that of a share in the business - it's then just a matter of studying the business and knowing how to read financial statements.

If stocks are seen as pieces of stocks sold on exchanges... then there's the share price movement, the market sentiment, volumes and trends to look into. Then if stocks are into an index, classified into groups based on market cap, industry and sector, into different markets etc... Then you start to have to look at alpha and beta, come up with precise measure of diversification and risk and return etc.

Pretty soon you focus on things of no real relation to the actual living and breathing business these instruments all ought to represent.


Like most investors, I have looked at Technical Analysis; I have been to university and formally study Applied Finance and took Master of Commerce (Fund Management)... So OK I drop out of the Master degree, but seriously, it's not like I just never look at these stuff and follow the first book some rich guy recommend.


Anyhoo... Unless a person's job depends on believing in something, they won't believe or open to ideas they do not already currently follow.


----------



## cynic

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> If system is defined as a set of principles, as an approach, then it's not mutually exclusive.



Whilst that's not quite how I would define a system, I am otherwise largely agreeable.



> But 'system' is not reason/understanding if it's simply a formula with variables to plug into.



I'm not quite sure that I correctly understand the point you're trying to make here. 

A formula/system/algorithm/model may lack the self awareness and capacity for independent reasoning, however, its creator and subscribers will have their reasons (irrespective of validity or lack thereof) for their decision to create/operate it.


> ...
> But if we follow a general principle approach, we would adapt, would input our own knowledge of main roads and short cuts to get to our destination.



Couldn't this simply be seen as a rational enhancement of a valid system pursuant to an appreciation of that system's scope and intent? 



> ---
> I think the problem with investing still being debated is because it's been transformed into some secondary and tertiary entity, and the focus is on understanding the new set of entities rather than the original form - yet studying the new form but thinking all form are the one and the same.
> ...



I'd agree that sometimes when additional layers of complexity evolve, the inner workings can become more deeply obscured.

I'd also agree that many(but certainly not all) do operate with an (at best) limited understanding of those inner workings.

However, the failure of some, to appreciate those inner workings, needn't necessarily invalidate those additional layers.



> ...
> Anyhoo... Unless a person's job depends on believing in something, they won't believe or open to ideas they do not already currently follow.



That may well be true of some people, but I sincerely doubt it could be true of all people.


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



cynic said:


> Not necessarily.
> 
> The motivation for asking could be to demonstrate to others that there is a distinct lack of evidentiary support for deeply entrenched beliefs.




Yes you are right

This IS the case.


----------



## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> Anyway, you are after a system right? A magic formula? One that you can plug numbers in or read the direction and reach El Dorado yea?
> 
> Get real man.




Yeah, get real tech, stop trying to scalp us out of our secret formulas, man, why don't you just do some hard work, man.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



cynic said:


> Whilst that's not quite how I would define a system, I am otherwise largely agreeable.
> 
> 
> I'm not quite sure that I correctly understand the point you're trying to make here.
> 
> A formula/system/algorithm/model may lack the self awareness and capacity for independent reasoning, however, its creator and subscribers will have their reasons (irrespective of validity or lack thereof) for their decision to create/operate it.
> 
> Couldn't this simply be seen as a rational enhancement of a valid system pursuant to an appreciation of that system's scope and intent?
> 
> 
> I'd agree that sometimes when additional layers of complexity evolve, the inner workings can become more deeply obscured.
> 
> I'd also agree that many(but certainly not all) do operate with an (at best) limited understanding of those inner workings.
> 
> However, the failure of some, to appreciate those inner workings, needn't necessarily invalidate those additional layers.
> 
> 
> That may well be true of some people, but I sincerely doubt it could be true of all people.





The two scenarios is to define what I meant as 'system' in the context of my reply to tech/a and your questioning of 'system'.

I agree that any method to do any thing could be define as a system - a way to handicap horses or pushing the pokie have a system to it too. 


A system can't be said to be valid when its application have, time and time again, fail miserably. Adding more level of sophistication, in the case of 'modern theory of finance' and DCF, have not work for stock investing.

Take a look at the DCF models I linked to above. Look at how many variables the user must get right. Look at how many models there are and how many variables to hit - the stages and growth rate; the interest rates and costs of capital; the time frame of each stages...

You can say that varying different models, using different WhatIF analysis and scenario mean it's not precise... But it clearly is a mathematical model design to be precise, and precise about the future, the future of a living organism.

If it could be done - predicting the future - it'd be brilliant. History have shown these models has not been able to. And on a theoretical level, when you look closely at the implication of all the sophisticated mechanisms involved, it's designed to obscure and give plausible deniability of nontalent and turn bad management into thoughtful ones more than trying to be scientific and accurate.

In a word, these crazy models are design to create jobs and to scare money out of the public. Even bad performance figures are beneficial to the "experts" - that if they the experts with all the resources and all the crazy models have done poorly, what hope does an average joe have? Would they risk it by doing it themselves?


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> Yeah, get real tech, stop trying to scalp us out of our secret formulas, man, why don't you just do some hard work, man.




According to you, I have already given "my" secret formula? No?

Instead of trying to be smart, why not pick a company or two that you got right or got wrong, and show us where you got it right and where you got it wrong.

I bet you would have no idea what goes right and what goes wrong after all that DCF modelling. Which kinda beg the question, why would anyone do something they have no idea and put no faith in it being reliable or not.


Put it another way... 

If you use DCF, say a 2 stage model (because 3 stage is insane right?)... 
If next year it turns out your estimate is wrong, why was it wrong?

Wrong because WACC was wrong? Wrong due to Earning/CF being higher or lower than you expect? Wrong but still right because it's wrong now but the timeframe is off a bit? All of the above, all equally affecting it?

Oh wait, you wouldn't get to know whether it's wrong or right to do that kind of analysis. You'd just "update" your valuation to "reflect" new changes and new landscape.

That's one way to kick the can down the road. Being paid to forecast the future, does the forecasting, then keep on forecasting and forecasting. 


Anyway, I wouldn't get too smug if I don't really know the implication of how my own model works.


----------



## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



luutzu said:


> According to you, I have already given "my" secret formula? No?
> 
> Instead of trying to be smart, why not pick a company or two that you got right or got wrong, and show us where you got it right and where you got it wrong.
> 
> I bet you would have no idea what goes right and what goes wrong after all that DCF modelling. Which kinda beg the question, why would anyone do something they have no idea and put no faith in it being reliable or not.




Mate you are a special kind of special. Your crazy assumptions about what people are talking about have completely warped your perception of the discussion going on here.

In this case, you assumed my statement about long term stream of cash flows (which is a fact) means that I use DCF modelling in my investment decisions.

Instead of trying to be smart, how about you leave this thread so it can go back on topic.

:bad::bad::bad::bad::bad:



> Anyway, I wouldn't get too smug if I don't really know the implication of how my own model works.




Yes. That is what is going on here, I have no idea about the assumptions, implications and returns of 3 seperate model portfolios which I have constructed through painstaking research and real time trading over 7+ years. 

I wish this forum had the option to hide posts from specified users.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> Mate you are a special kind of special. Your crazy assumptions about what people are talking about have completely warped your perception of the discussion going on here.
> 
> In this case, you assumed my statement about long term stream of cash flows (which is a fact) means that I use DCF modelling in my investment decisions.
> 
> Instead of trying to be smart, how about you leave this thread so it can go back on topic.
> 
> :bad::bad::bad::bad::bad:
> 
> 
> 
> Yes. That is what is going on here, I have no idea about the assumptions, implications and returns of 3 seperate model portfolios which I have constructed through painstaking research and real time trading over 7+ years.
> 
> I wish this forum had the option to hide posts from specified users.




Yup. My mother always said I was special. 

7 years? Most non-special people would have figured out they don't know what they're doing a month or two into doing it. Takes talent to keep at it for that long and still can't tell.


Let me be polite and say that if this approach of yours pays for itself for you - as in you use it in investing and no one else is paying you to apply it; that it's so profitable it pays for itself... then great for you. Keep it up.


----------



## Trembling Hand

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> I wish this forum had the option to hide posts from specified users.




It does.


----------



## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



Trembling Hand said:


> It does.
> 
> View attachment 63505




Of course.

We all know great men thinks best when they have around them agreeable men, all saying how great they are.


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

So----------Any evidence based papers people would like to recommend?

Interested in comments or any *further* comments on the veracity of methods used to determine evidence.


----------



## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

If you are actually interested in pursuing this tech, I would advise getting a membership to CXO Advisory. Generating evidence which is robust is difficult and time consuming, so a lot of evidence is not free access.

http://www.cxoadvisory.com/what-investing-approaches-work-best/


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> If you are actually interested in pursuing this tech, I would advise getting a membership to CXO Advisory. Generating evidence which is robust is difficult and time consuming, so a lot of evidence is not free access.
> 
> http://www.cxoadvisory.com/what-investing-approaches-work-best/




Excellent 
Thank you.


----------



## CanOz

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

I'm not sure if this belongs here or not Tech/A, but i know you're looking for ideas for systems....I came across this podcast last night, its an interview with the CEO of Systematic Alpha, a NY boutique fund. They use various automated market neutral strategies that take advantage of mis-pricings from liquidity differences, among other things for profit..

I was quite impressed on how much he talked about his strategies, in particular the ES/FTSE/6B spread. This gives you ideas for many more market neutral strategies.

TopTradersUnplugged

CanOz


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



CanOz said:


> I'm not sure if this belongs here or not Tech/A, but *i know you're looking for ideas for systems....*I came across this podcast last night, its an interview with the CEO of Systematic Alpha, a NY boutique fund. They use various automated market neutral strategies that take advantage of mis-pricings from liquidity differences, among other things for profit..
> 
> I was quite impressed on how much he talked about his strategies, in particular the ES/FTSE/6B spread. This gives you ideas for many more market neutral strategies.
> 
> TopTradersUnplugged
> 
> CanOz





No I'm not.

I'm looking for methods used to give evidence used to support results.
Howard is very clear with his---what is required to verify results.
To prove robustness.


----------



## CanOz

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> No I'm not.
> 
> I'm looking for methods used to give evidence used to support results.
> Howard is very clear with his---what is required to verify results.
> To prove robustness.




Well please accept my apologies then, I thought you were also still considering ideas for systems....


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



CanOz said:


> Well please accept my apologies then, I thought you were also still considering ideas for systems....




Sorry that came across as my usual terseness.
I've had a look at the site and another good read.

What I'm looking for is evidence that the results that are achieved positive or negative have been attained 
using a method that is not flawed in it self.
I'm sure many tests and in fact many systems people have adopted and traded haven't been evaluated correctly.

Other than the Anecdotal Evidence we have seen here and of course "Appeal To Authority" logical fallacy (sic).
My search continues.

Rubbish in Rubbish out.


----------



## galumay

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> My search continues.
> 
> Rubbish in Rubbish out.




Do you think its actually possible to have evidence based results that would be meaningful? 

It just seems to me that there are some inherent issues in equity markets that make any such confirmation unlikely.

The best that might be expected would be evidence that a given system worked at some point in the past, its logically impossible to then assume that the system would provide the same outcome in the future. Equity markets seem to dynamic with so many complex inputs into their outcomes, this would seem to indicate that only historical assumptions could be drawn from any evidence.

It occours to me that the market itself provides absolute empirical evidence for the outcome of one method of investing, (again only historical with no logical assumption it will hold true in the future.), that is extreme long term buy and hold of the index. The total rate of return has been well in excess of inflation and tax for any longer period of time you choose. Maybe that is a sort of benchmark for what you are looking for? 

I have seen plenty of evidence for specific fundamental strategies, but they are in no way up to an academic standard of research and are very specific to particular markets, I dont think that is the rigour you are looking for.


----------



## Trembling Hand

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



galumay said:


> It occours to me that the market itself provides absolute empirical evidence for the outcome of one method of investing, (again only historical with no logical assumption it will hold true in the future.), that is extreme long term buy and hold of the index. The total rate of return has been well in excess of inflation and tax for any longer period of time you choose. Maybe that is a sort of benchmark for what you are looking for?




You know that Index investing is a very crude trading system. It is basically a weighted trend following system. Rewarding the market cap gainers and culling those that have decreasing market cap.

So if that dumb system "works" so should some other systems. But that still doesn't answer Techs question about robust techniques to test for such success .


----------



## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



Trembling Hand said:


> You know that Index investing is a very crude trading system. It is basically a weighted trend following system. Rewarding the market cap gainers and culling those that have decreasing market cap.
> 
> So if that dumb system "works" so should some other systems. But that still doesn't answer Techs question about robust techniques to test for such success .




It's not necessarily so cut and dried as that.

Cap weighting is passive and scalable, a globally cap weighted portfolio (including credit) is the only portfolio which, theoretically, all market participants could hold simultaneously. With the big assumption, of course, that the market can appropriately price the issuance of shares.

Research and ratings organisations like MSCI and S&P add extra rules (like liquidity filters, or economic representativeness, etc) and it is generally those rules which actually constitute the differences from a raw cap weight benchmark.


----------



## Trembling Hand

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> It's not necessarily so cut and dried as that.
> 
> Cap weighting is passive and scalable, a globally cap weighted portfolio (including credit) is the only portfolio which, theoretically, all market participants could hold simultaneously. With the big assumption, of course, that the market can appropriately price the issuance of shares.
> 
> Research and ratings organisations like MSCI and S&P add extra rules (like liquidity filters, or economic representativeness, etc) and it is generally those rules which actually constitute the differences from a raw cap weight benchmark.




Nevertheless its still a crude system that fundies often say works. If such ideas are good there are more ideas out there that should be better considering how dumb it actually is.


----------



## galumay

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



Trembling Hand said:


> You know that Index investing is a very crude trading system. It is basically a weighted trend following system. Rewarding the market cap gainers and culling those that have decreasing market cap.
> 
> So if that dumb system "works" so should some other systems. But that still doesn't answer Techs question about robust techniques to test for such success .




I guess you could call it a trading system, but I think its gernerally considered as a long term investing strategy.

I am not sure that its logical to assume because one system works, others should. That seems an absolute non-sequitor to me! 

It only answers Techs question in the sense that it is an absolutely robust test for the system - 100 years plus of evidential results that can be simply and easily confirmed. The problem is I dont think it throws any light on an evidential methodology for any other system. The evidence for the long term, buy and hold, the index is absolute and complete - but thats all its good for testing. As soon as the system varies then the evidence (index history.) is not specifically relevant.

As much as i hate to invoke the 'B' word, that's why Mr B advocates most investors simply investing in the index and reinvesting the income. The evidence for it's success historically is not open to challenge and it requires no active investment knowledge or skill.

When I think about how most of us invest/trade I cant see evidentially based result reflecting on the systems or strategies being reliable. Who among us does this in a totally automated manner, with no input from our own subjective analysis? I guess some traders apply systems totally automatically, I cant imagine many others would though.


----------



## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



Trembling Hand said:


> Nevertheless its still a crude system that fundies often say works. If such ideas are good there are more ideas out there that should be better considering how dumb it actually is.




It's not necessarily "good" as a trading system, but due to the possibility of everyone holding, that makes it a good benchmark. 

For example, there is not much point benchmarking a $100bn manager with someone who invests in mining juniors on the ASX, and by the same token it's not fair to benchmark small investors against their ability to hedge credit risk with CDS...so the capweight is a good benchmark for everyone big and small.

(keep in mind that I am referring to a portfolio that consists of both equity and credit here, not just capweight stocks).

Now, the funny thing about benchmarks is that most people (including hedge fund managers etc) mistake the benchmark as being a "baseline" whereas, over large enough sample of traders and trades, you will find the benchmark is actually a lot closer to the "ceiling" than you may have originally considered, *especially* when using leverage (yay exogenous shocks). This holds even more true for small investors without access to volume brokerage, tax advantages, etc. 

This leads to the misconception that some "tweaks" will add value and allow one to outperform the benchmark (although it has been demonstrated that some tweaks actually do) and through these tweaks actually lose alpha.

Coupled with behavioural issues, the chance of them "adding value" to an extent that would generate statistically significant alpha for sustained periods across market regimes is quite low (if they even survive that long).

You may be mistaking recognition of these facts and subsequent recommendation that would-be investors take advantage of index funds to mitigate most of these issues, and thereby outperform the "average investor" (although some might be forgiven for thinkings so, this doesn't actually equal making profits), as a recommendation that these strategies are "good".

Slight difference I think.


----------



## Trembling Hand

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

LOL Sinner.......


----------



## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



Trembling Hand said:


> LOL Sinner.......




I know, I know...you are probably thinking "gee, considering a rant like that, what are you doing thinking you can outperform the market?"

Well...like I said, some "tweaks" have been shown to add value! Plus, not everyones goal is to outperform the index, or beat the average investor (who's return will have a slight to moderate drag vs the benchmark, and which may be deeply negative at points in time), or even to make it big.

My goals have shifted over time and I care much less about getting rich or whatever compared to the stress levels it caused me, so at least for the portion of capital I allocate to things I deem as "risk" assets, I'd be happy to nominally double the capital base every 10 years or so, at  the lowest volatility and drag on geometric returns as possible. That's only ~7% p.a. after tax, not such a crazy expectation, although I'm seeing it will be more difficult in the next 5y than the last.

Just as an example of goals...this sort of equity curve is not *that* hard to achieve as it turns out...


----------



## Trembling Hand

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> I know, I know...you are probably thinking "gee, considering a rant like that, what are you doing thinking you can outperform the market?"




 Sinner I was just trying to point out something that index tracking by the nature of indexes, that is they generally reward winners and cull losers, is a system. A blunt TA system, yet its mostly the fundies who champion it. I was wondering if they see it as similar to what TA'ers do because it looks like a trend following system based on quarterly bars.


----------



## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



Trembling Hand said:


> Sinner I was just trying to point out something that index tracking by the nature of indexes, that is they generally reward winners and cull losers, is a system.




I'm not actually disagreeing, more just pointing out that it is, out of the entire basket of systems, a unique system.



> A blunt TA system, yet its mostly the fundies who champion it. I was wondering if they see it as similar to what TA'ers do because it looks like a trend following system based on quarterly bars.




It's obviously not a blunt TA system though, because that of how the universe of stocks is created. It has a few of the attributes of a TA system, in that it does reward winners while culling losers, but the effect isn't perfect or intentional, since the correlation between returns and market capitalisation is not perfect. A 200% return in your share value is not going to guarantee you entry to the index, you actually have to be in the 80% market capitalisation bracket. There is a hysteretic entry point, but it's fundamentally based.

Nor are winning stocks always rewarded while losing stocks always punished. 
Sometimes stocks in the index get punished out of the index simply because they no longer represent the makeup of the economy.
Sometimes stocks are rewarded into the index because they are a growing sector of the economy.


----------



## systematic

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Apologies if it's too late in the thread to ask.  tech/a, I need some clarifcation.  Are you looking for what different people count as sufficient evidence (in an imperfect world) for a strategy to be considered empirically robust?

That seems to be slightly different to the wording of your original post, but I think (from more recent replies) that it is what you are after.

If I have this correct (and I don't know whether I do or not)...can I ask what your interest is?  Meaning; are you looking to broaden the ideas base of how to assess a system idea, for example?  The reason I ask is because you'd already be familiar with the way several traders (e.g. Nick Radge) evaluate robustness.  So, is it that you see any flaws in the type of stats that trading software (such as Amibroker - which I'm not familiar with) spit out?  Or are you curious about other ways of assessing robustness?

Or have a misread you entirely, and it's not, "how to evaluate the robustness of a strategy" that you are talking about?

The reason I need the clarification is that - as I mentioned above - you originally asked simply for examples of papers with rigorously tested results.  There are many examples of empirical papers...with _various levels of rigor_ applied to the tests.  It's no different in academia than it is in the world of practioners.

I have just been listening to the podcast interviews done by Better System Traders.  There have been some on there that have said things that have made me thought, "I could never trade one of their systems".  Doesn't mean it doesn't work for them.  I just wouldn't consider it 'rigorous' enough testing to give me the confidence to trade.

The academic world and the world of practioners is no different - there are simply different levels of quality in testing...and in interpreting the results.

One thing has come through from nearly all the interviews (if not all) and I wholeheartedly agree with it.  The whole point is to be 'rigorous enough' (to use your word) to give you the confidence needed...to keep trading the thing...especially when times are bad.  Well, that's the psychological part.
Of course, the initial stage is simply that we want to ensure (as much as is possible) that what we are looking at is real, and not a mirage.  That's a good thing, and I think it's what you are now talking about in this thread.

This is a question in itself, debated in academia (actually some good papers in recent times about "how we should test / interpret results").  There's no 'perfect' answer here, either.  But I think we can get close.  Close enough to be able to place a trade, at least.

In my opinion, there is the statistical aspect of interpreting result - which is a field of its own.
However, there are also qualitative factors to consider, at least for me.  I've mentioned my own shopping list before.

Stuff like:
The idea must have been around before the current age of computer testing (with evidence in literature).  Therefore it must work across time.
There simply must be international evidence that the thing works (too much is worked on with US data to be confident if that's all it's been tested on).  Therefore it must work across geography.
For me, I'm happy if the thing works across asset classes.

I want an economic theory (intuitive reason) why the thing works.  I'll read the risk based reasons for interest (yawn), but I - since I began - have found the behavioural reasons most compelling / intuitive.  It goes to the core of who I am / my philosophy as a trader.  So, I guess that's my bias.

And of course...back to where we started...there has to be a strong empirical result.  For me, I just like the kitchen sink approach.  All the usual stats...high t stats etc; whilst appreciating that backtesting can overfit insignificant factors...which is why a result must prove significant on its own.  I want to see multiple sub-sample results (time periods / market states).  I want to see parameter changes not change the result.  For that matter I want to see an alternative measurement of the thing not change the conclusion.  I want to see value weighted results not change the conclusion gained by the no doubt better results gained by equal weight.  I want to see the data / methodology utilise all the usual practices (delisted stocks accounted for, financial information known at the time, sufficient liquidity to trade in real life etc).  As mentioned already, I want to see the thing work elsewhere.  I also want to see the thing tested to work _after_ being published by academia and known about by practioners.

"I want it all, and I want it now" is going through my head, now.  That's why I stick to some real basics, and tweak within those.  I do not have the confidence / chutzpah to invest life savings on the latest gimmick in the factor zoo (there's a good paper by that name...one of the current crop of papers addressing this very question).  At the same time, as mentioned, it's good to remember that we live in an imperfect world and that a search for absolute certainty in these matters will lead only to frustration.

Everyone's got to work out what they are going to be happy with, I guess.  For example, my list is probably quite different to Howard Bandy's list (also in this thread, on page 1).  I respect his ideas but don't agree with some of them.  That's what makes it necessary to eventually have your own opinion (aside from the fact that some things are just true and false, in basic maths etc).  As always, that's what makes the market.


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



> Apologies if it's too late in the thread to ask. tech/a, I need some clarifcation. Are you looking for what different people count as sufficient evidence (in an imperfect world) for a strategy to be considered empirically robust?




Yes this is a part of it.



> That seems to be slightly different to the wording of your original post, but I think (from more recent replies) that it is what you are after.
> 
> If I have this correct (and I don't know whether I do or not)...can I ask what your interest is? Meaning; are you looking to broaden the ideas base of how to assess a system idea, for example? The reason I ask is because you'd already be familiar with the way several traders (e.g. Nick Radge) evaluate robustness. So, is it that you see any flaws in the type of stats that trading software (such as Amibroker - which I'm not familiar with) spit out? Or are you curious about other ways of assessing robustness?




Both and more.



> Or have a misread you entirely, and it's not, "how to evaluate the robustness of a strategy" that you are talking about?
> 
> The reason I need the clarification is that - as I mentioned above - you originally asked simply for examples of papers with rigorously tested results. There are many examples of empirical papers...with various levels of rigor applied to the tests. It's no different in academia than it is in the world of practioners.
> 
> I have just been listening to the podcast interviews done by Better System Traders. There have been some on there that have said things that have made me thought, "I could never trade one of their systems". Doesn't mean it doesn't work for them. *I just wouldn't consider it 'rigorous' enough testing to give me the confidence to trade*.




Same page here.

To elaborate.

Over the last 20 yrs I have read countless books on a great variety of ideas.
In the last 10 yrs I get to the end of a book and find myself asking for Evidence to support the contents of the book/s.
There is volumes of hindsight evidence (Look here is the signal and here is how it panned out).
There are even pages of system test results with the mandatory waiver that past results cant guarantee future results.

Even some evidence of how failed trades are handled.

This leads me to where I am now.

(1) In an age where technology is advancing faster than a bushfire there "seems" to be a void in what is available 
to people like me---Joe Average builder not a PHD in Computer Science or Maths. It seems to be rudimentary from what I can gather from those that do have PHD's

(2) Then there is the question of the ability of the user to actually design a method and know what he is looking for.
To know how to evaluate and to continually manage their method.

(3) To even be able to evaluate a software and its capabilities let alone put it to work. Are there software's available that CAN explore even the simple question "Should Support and Resistance play a role in a trading method?"'

(4) I've seen many arguments on Monte Carlo Analysis----which one is correct? Monte Carlo can be a powerful tool
from what I understand but unless I have confidence in the analysis available how can I have confidence when using it.

I want to know what I need to know---and above all I want to come to that conclusion myself!


----------



## craft

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> but unless I have confidence in the analysis available how can I have confidence when using it.




What are you really looking for.

Now that the vale of misguided certainty has been lifted, I’m 'certain' you should embrace the 'uncertainty'.  As much as you might want to give your resident quant a job and build another vale of certainty, I reckon the best eye – trade/investment  skills are developed under the full glare of realistic uncertainty.

Do you reckon the guys in your tennis analogy know some secret about tennis or have some prior certainty about the right shot at the right time? Or are they just better players, better reactions - more practiced in the competitive conditions.


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

They would have

(1) Better coaches
(2) Better coaching Facilities.
(3) They would know what they need to know to beat an opponent.
(4) A lot better motivation as they reap the rewards of being an expert.

*CRAFT*

I hear where your coming from and most including myself do recognise those faces 
in the crowd and trade them.
But even a simple question like.
Should I consider volume in my trading. To my mind needs an answer one I can be confident of.

I want to be able to evaluate what I'm doing.
This will give me the confidence when trading serious amounts.
Maybe its just a personal thing and I'm in the minority.


----------



## craft

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> This will give me the confidence when trading serious amounts.
> Maybe its just a personal thing and I'm in the minority.




No I reckon that puts you in the majority!!!!!

Confidence in yourself in the face of [known] uncertainty - that's probably a minority.


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



craft said:


> No I reckon that puts you in the majority!!!!!
> 
> Confidence in yourself in the face of [known] uncertainty - that's probably a minority.




Well if that's the case I know a few of these guys
No longer where they expected to be.
After 50-60 yrs they are looking back and they KNOW why they aren't where they could have been.
3 I'm thinking of directly .

(1) He under valued his under value of his 2 x $1.5 million Apartments he bought and is now left with 3 mill debt and $1.8 mill of current asset.----He was supremely confident in his purchase.

(2) He over valued his place in his market and when he bought a new business to combine with
his own he couldn't keep clients---He was and still is very confident in his ability to read his industry.

(3) He undervalued the sale of his business and the new owner saw great potential doubling his business
in 2 yrs.----He was super confident his business was about to fail.

Sure there are no hard and fast guarantees in anything in this world.
But I for one are glad that a more rigorous approach is used in Medicine/Product Quality Control/Building Codes/Professional training.

I'm glad I don't come up against to many who have confidence in themselves in the face of uncertainty, when my Safety/Lively Hood or Money are concerned.
There are plenty of investors in Melbourne and Sydney who are buying off plan apartments from developers who are at the extreme of  your minority.
I'm sure there are lots of Trading packages/Newsletters/methods and Systems who also fit in your group.

Ill stay with the majority thanks---its served me well.


----------



## craft

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> Well if that's the case I know a few of these guys
> No longer where they expected to be.
> After 50-60 yrs they are looking back and they KNOW why they aren't where they could have been.
> 3 I'm thinking of directly .
> 
> (1) He under valued his under value of his 2 x $1.5 million Apartments he bought and is now left with 3 mill debt and $1.8 mill of current asset.----He was supremely confident in his purchase.
> 
> (2) He over valued his place in his market and when he bought a new business to combine with
> his own he couldn't keep clients---He was and still is very confident in his ability to read his industry.
> 
> (3) He undervalued the sale of his business and the new owner saw great potential doubling his business
> in 2 yrs.----He was super confident his business was about to fail.
> 
> Sure there are no hard and fast guarantees in anything in this world.
> But I for one are glad that a more rigorous approach is used in Medicine/Product Quality Control/Building Codes/Professional training.
> 
> I'm glad I don't come up against to many who have confidence in themselves in the face of uncertainty, when my Safety/Lively Hood or Money are concerned.
> There are plenty of investors in Melbourne and Sydney who are buying off plan apartments from developers who are at the extreme of  your minority.
> I'm sure there are lots of Trading packages/Newsletters/methods and Systems who also fit in your group.
> 
> Ill stay with the majority thanks---its served me well.




Very easy to derail what I’m trying to say into your argument of the perils of misplaced confidence in yourself and that is a risk. But if you fully embrace and understand the uncertainties you are more likely to guard against doing dumb things.  Sizing up without doing dumb things, the answer is within, not in something you will find outside of yourself.

Anyrate your journey, you have to come to your own conclusions.


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

No conclusions yet only suspicions
I may eventually agree with you.

Seems I'm in a majority so not alone.


----------



## skc

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Tech/a, I am still a bit uncleared on what you are ultimately looking for.

Can you offer a hypothetical example of what would satisfy your "evidence based results"?

Are you looking for something as iron-clad as "Water boils @ 100 degree'?

Or is something like "Monday opening gaps are closed before Friday on the SPI 72% of the time" good enough?


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



skc said:


> Tech/a, I am still a bit uncleared on what you are ultimately looking for.
> 
> Can you offer a hypothetical example of what would satisfy your "evidence based results"?
> 
> Are you looking for something as iron-clad as "Water boils @ 100 degree'?
> 
> Or is something like "Monday opening gaps are closed before Friday on the SPI 72% of the time" good enough?




I'm actually looking *at* rather than *For*

In layman's terms (mine I'm a builder)

{Relevance 
Data
Software used
Language and logic
Rational
Parameters
Sophistication
Topic
Result---

Ease of replication.}

all encompassing Evidence


----------



## ThingyMajiggy

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> I'm actually looking *at* rather than *For*
> 
> In layman's terms (mine I'm a builder)
> 
> {Relevance
> Data
> Software used
> Language and logic
> Rational
> Parameters
> Sophistication
> Topic
> Result---
> 
> Ease of replication.}
> 
> all encompassing Evidence




I don't think there is such a thing? Wouldn't that be like trying to make a fully automatic trading system, at some point it will probably blow up because of so many changing conditions in the market. Would be similar trying to test the actual trading system itself and get the evidence it worked, because they are all so different and it might prove certain aspects of the method/system, but not a simple goto answer of YES or NO it doesn't work.


----------



## tech/a

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



ThingyMajiggy said:


> I don't think there is such a thing? Wouldn't that be like trying to make a fully automatic trading system, at some point it will probably blow up because of so many changing conditions in the market. Would be similar trying to test the actual trading system itself and get the evidence it worked, because they are all so different and it might prove certain aspects of the method/system, but not a simple goto answer of YES or NO it doesn't work.




Not on the same page here.


----------



## ThingyMajiggy

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



tech/a said:


> Not on the same page here.




Well it seems that you're wondering if there's like some certain formula or process that can be waved over a trading system/method and it spits back out whether that system would work or not? Or I may be way off, that's just how I'm understanding it.  

But I was just thinking trying to come up with that ^^ would be like trying to make a trading system at all in the first place, there's just too many variables and different conditions to get a long-lasting solid method/system(hence why most fail). 

It would be hard to come up with what I said in the first paragraph because there are that many different systems/methods that surely there just isn't such a process/formula that would work on ALL methods/systems as a hard and fast goto formula that spits out whether it works or not and why(That is....other than an equity curve over time). The parallel is that there are too many conditions/variables in either scenario for there to be a long-lasting definite method, trading system or trading-system-evaluator/evidence-producer. 

I'm just thinking out loud here, all of the above might actually be possible, I dunno.


----------



## Ves

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> Just as an example of goals...this sort of equity curve is not *that* hard to achieve as it turns out...
> View attachment 63508



Sinner,  been enjoying reading some of your posts since you returned.

The possible strategies behind the equity curve you've linked....  where on the spectrum of active to passive do they fit?  What kind of scale is required before transaction costs become too significant etc.   I guess what I am really asking,  is how suitable are they do Joe Bloggs who doesn't have a big capital base,  but has plenty of compounding time,  and a basic grasp of finance (and capability / willingness to learn more).

If not relevant to thread,  probably a suitable thread on here elsewhere.


----------



## Trembling Hand

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



Ves said:


> The possible strategies behind the equity curve you've linked....  where on the spectrum of active to passive do they fit?  What kind of scale is required before transaction costs become too significant etc.   I guess what I am really asking,  is how suitable are they do Joe Bloggs who doesn't have a big capital base,  but has plenty of compounding time,  and a basic grasp of finance (and capability / willingness to learn more).
> 
> If not relevant to thread,  probably a suitable thread on here elsewhere.






http://wealthmanagement.com/etfs/can-we-count-absolute-returns


----------



## Ves

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



Trembling Hand said:


> http://wealthmanagement.com/etfs/can-we-count-absolute-returns



Thanks mate,  looks like the equity curve posted is the Credit Suisse Multi-Strategy Hedge Fund Index.


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## DeepState

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> I wish this forum had the option to hide posts from specified users.




Settings -> Edit Ignore List -> <INSERT NAME>

Go for it.


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## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



Ves said:


> Sinner,  been enjoying reading some of your posts since you returned.
> 
> The possible strategies behind the equity curve you've linked....  where on the spectrum of active to passive do they fit?  What kind of scale is required before transaction costs become too significant etc.   I guess what I am really asking,  is how suitable are they do Joe Bloggs who doesn't have a big capital base,  but has plenty of compounding time,  and a basic grasp of finance (and capability / willingness to learn more).
> 
> If not relevant to thread,  probably a suitable thread on here elsewhere.




Hey mate, consider it a small repayment for the enjoyment I've derived from reading yours 

There is no real limit in either direction. Basically the absolute minimum is that you have to be willing to rebalance eventually, and geometric returns will be heavily influenced by how often you are willing to do so. Not by juicing returns but by allowing you to manage drawdowns and harvest/manage volatility. Annual rebalancing is ok, and can even be tax optimised for those not operating under a business structure. Sell your losers the day before FY end and your winners the day after. But obviously the returns will be lower than a quarterly or monthly rebalance.

The same thing applies to scale/transaction costs. Let's say you want to allocate 25% of total to stocks, if you can't afford brokerage on holding 10-20 individual stocks and therefore have to hold the index, obviously you are going to be buying a small amount of crap that adds a drag to returns and increases your overall vol and correlation. By the same token, if you insist on holding 10-20 stocks rather than the index despite being unable to afford it, it'll drag your returns regardless how good the picks are!

The article TH linked mentions "upside vol" vs "downside vol" but personally from my research I prefer to scale on vol regardless of upside or downside. Upside vol spikes are usually associated with bubble highs (e.g. NASDAQ100 tech bubble) or hyperinflation!

So here are a couple of examples (I think probably the newest example which is quite good I already linked in my first reply, Momentum and Markowitz)

3 way (this one is new to me, but it looks pretty interesting, considering how similar the buy+hold curve is to the trend following one)
http://mebfaber.com/2015/06/16/three-way-model/

Permanent Portfolio (I have linked these before but they are appropriate here again - especially good since it illustrates what I described above quite nicely and also includes Japan example where stocks go down forever)
http://gestaltu.blogspot.com.au/2012/08/permanent-portfolio-shakedown-part-1.html
http://gestaltu.blogspot.com.au/2012/08/permanent-portfolio-shakedown-part-ii.html
http://gestaltu.blogspot.com.au/2012/09/the-permanent-portfolio-turns-japanese.html

TAA horserace:
http://blog.alphaarchitect.com/2015...robust-asset-allocation-raa-vs-dual-momentum/

Some other TAA stuff in my original thread post too.

If you're starting small can focus on local, low cost options and diversify as you scale. As the scale increases diversity does allow you to lower volatility and correlations further. For example 25% is "cash" but no reason you can't split that out between AUD, EUR, USD, JPY. Bonds can be diversified by duration or country, stocks by sector, factor, country, etc. Or you can hold 70% in cash and the remaining 30% into whatever Berkshires top 5 holdings are. and so on.


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## cynic

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



DeepState said:


> Settings -> Edit Ignore List -> <INSERT NAME>
> 
> Go for it.




I think Sinner was wishing for a way to conceal posts from a nominated user.


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## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



cynic said:


> I think Sinner was wishing for a way to conceal posts from a nominated user.




Hehe! Thanks for the concern guys, I took TH/DS suggestion and everything is wonderful.


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## luutzu

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> Hehe! Thanks for the concern guys, I took TH/DS suggestion and everything is wonderful.





You guys are mean. You're going to make me cry.

haha.


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## Ves

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



sinner said:


> So here are a couple of examples (I think probably the newest example which is quite good I already linked in my first reply, Momentum and Markowitz)
> 
> 3 way (this one is new to me, but it looks pretty interesting, considering how similar the buy+hold curve is to the trend following one)
> http://mebfaber.com/2015/06/16/three-way-model/
> 
> Permanent Portfolio (I have linked these before but they are appropriate here again - especially good since it illustrates what I described above quite nicely and also includes Japan example where stocks go down forever)
> http://gestaltu.blogspot.com.au/2012/08/permanent-portfolio-shakedown-part-1.html
> http://gestaltu.blogspot.com.au/2012/08/permanent-portfolio-shakedown-part-ii.html
> http://gestaltu.blogspot.com.au/2012/09/the-permanent-portfolio-turns-japanese.html
> 
> TAA horserace:
> http://blog.alphaarchitect.com/2015...robust-asset-allocation-raa-vs-dual-momentum/



Thanks sinner

I must admit,  haven't read about the permanent portfolio for a fair while.   Good reminder,  the Meb Faber and Alpha Architect links make a lot more sense after reading the Gestaltu pieces.

So basically for the low volality hedge fund strategies a lot of these managers are taking a simple basis for asset allocation like the permanent portfolio and running all sorts of filters across it to 'tweak' the end result in the desired fashion depending on the targeted return / volatility?

Currently I'm running a core & satellite portfolio.  The core part is VAS/VGS skewed more towards the international ETF.  Satellite is a portfolio of 8-10 stocks at any one time based on Aussie mid-caps that I believe are under-valued based on future cashflows.

The main reason I've switched to core & satellite is for the same reason that craft so succinctly puts it in his post here about "embracing uncertainty."   Actually I think if anything the "core" part of my portfolio a lot of self-created stress out of off my stock-picking approach.  Not sure how to explain it in words.

I'll start making my way through the rest of the Gestalt blogs... I'm sure there are lots of tweaks that might be useful for me.

Embracing uncertainty seems to be a big roadblock for me in a lot of things in life;  so threads like this are incredibly useful.

BTW,  with the momentum filters  (ie.  100 days moving average line),  I assume there are also inversions of this (not sure if they'd call it "value.").  Might have missed it in the links.


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## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



Ves said:


> Thanks sinner
> So basically for the low volality hedge fund strategies a lot of these managers are taking a simple basis for asset allocation like the permanent portfolio and running all sorts of filters across it to 'tweak' the end result in the desired fashion depending on the targeted return / volatility?




The big guys take full advantage of the extra opportunities they get. So for example, rather than buying the 30Y bond, they might buy the 2Y bond and lever it up to the same volatility level as the 30Y and thus achieve a better Sharpe. Bill Gross of PIMCO fame wrote the seminal paper on that kind of thing. I do have a copy but it's a paid material so I can't share. The title is "Consistent Alpha Generation through Structure" - William Gross. You can see the results of this by looking at the returns on the various PIMCO funds comparing "Plus" funds to the "not Plus" funds. It works.

They will also take better advantage of funding/leverage. Crude example but let's say their model suggests a 125% allocation to stocks, they can achieve that with a better outcome than the average joe. 



> Currently I'm running a core & satellite portfolio.  The core part is VAS/VGS skewed more towards the international ETF.  Satellite is a portfolio of 8-10 stocks at any one time based on Aussie mid-caps that I believe are under-valued based on future cashflows.
> 
> The main reason I've switched to core & satellite is for the same reason that craft so succinctly puts it in his post here about "embracing uncertainty."   Actually I think if anything the "core" part of my portfolio a lot of self-created stress out of off my stock-picking approach.  Not sure how to explain it in words.




I know exactly what you're trying to explain! Nothing wrong with the concept you espouse, my only concern would be that during periods of high volatility you will find that the correlation of your portfolio to be essentially 1. So while you might find your choice to be more performant during "good times" it will be not so different from the index (and on a random chance basis, worse) during downturns. Again, nothing wrong with this, but you will find it is pretty much the opposite goal of the above portfolios (get some returns during good times limited because you're also holding cash and bonds and whatever but suffer less drawdowns during bad times).



> BTW,  with the momentum filters  (ie.  100 days moving average line),  I assume there are also inversions of this (not sure if they'd call it "value.").  Might have missed it in the links.




What you will find is that on a technical basis the proxies for value are not the perfect inverse of the proxy for momentum!

So, for example, momentum generally appears on short term timescales (<~250 days, >~40 days) so you would want your "Rate of Change" or "RSI" or "Moving Average" to be set appropriately and thus actually capture the movements. There is a high correlation between these signals and whatever the market is most currently interested in. 

"Value" (note the inverted commas) might argue that returns can also be had from whatever the market is *least* interested in. But does the negative <1y return on assets dictate market disinterest? No. What you will find is it is more like, >3-5y. So assets which performed the most poorly over the last 5y might be expected to outperform strongly over the next 5y (not 1y!!!) period. Kind of easy, rank by the worst 5y total return and buy the top decile for 5y. If you wanted to use a squiggly line, I might suggest something a little more complicated, like 2 standard deviations below the 3y avg (no idea if that would work, just a random example).

There is actually a lot of evidence for this kind of behavioural stuff, popular stocks get overtraded and thus return less, unpopular stocks are undertraded and therefore built in return factor. Popular stocks get overvalued, unpopular stocks undervalued, etc.

For more on this, see the paper I linked in the first post titled "Value and Momentum everywhere".


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## craft

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



Ves said:


> Currently I'm running a core & satellite portfolio.  The core part is VAS/VGS skewed more towards the international ETF.  Satellite is a portfolio of 8-10 stocks at any one time based on Aussie mid-caps that I believe are under-valued based on future cashflows.
> 
> The main reason I've switched to core & satellite is for the same reason that craft so succinctly puts it in his post here about "embracing uncertainty."   Actually I think if anything the "core" part of my portfolio a lot of self-created stress out of off my stock-picking approach.  Not sure how to explain it in words.
> 
> I'll start making my way through the rest of the Gestalt blogs... I'm sure there are lots of tweaks that might be useful for me.
> 
> Embracing uncertainty seems to be a big roadblock for me in a lot of things in life;  so threads like this are incredibly useful.




Probably managed to get this thread of track more than most.

But to my warped line of thinking there is relevance in talking about uncertainty in an evidence based thread. As the greater return you reach for the less robust the evidence becomes. 

None of this evidence, just my beliefs.  If you stay in the markets long enough you get to know that you don’t and can’t know a lot of stuff. (The beginner’s cycle of looking for certainty has finished) .  
What do you do next? Disbelieve that uncertainty must prevail and re-enter an advanced beginners cycle, there’s got to be something out there that I don’t understand yet that will give me the certainty – neural networks advanced academic theory something.

Lower the risk, comprehend that you can’t reach for the upside without opening yourself to the down side.  Couple of options now – get out completely, Risk only a small part of your wealth on high risk. Expose as much of your wealth as you can to lower risk strategies and perhaps a little more where the best evidence actually exists. 

Continue to chase high returns in the face of fully comprehended uncertainty.  To do this causes what I believe they call Cognitive dissonance, holding two completely opposing views at the same time.  This is very uncertain plus I still retain confidence.  Living your life with constant cognitive dissonance is very difficult – you will always want to ease it by reducing size, seeking out certainty or slipping into overconfidence and dismissing the risks. I think the exceptional traders can hold themselves in cognitive dissonance and keep the right balance between uncertainty and confidence.  For some reason I can maintain the required Cognitive Dissonance with Investing at the moment but I couldn’t with trading – IF I didn’t relieve the pressure by trading smaller I would become an emotional train wreck, the outcome didn’t matter up or down I couldn’t handle either at size.  That’s why I don’t trade anymore.   I couldn’t scale.

I have an analogy that helps me understand it from white water kayaking. Sit at the top of a grade 5 Rapid and feel the emotion, there’s no certainty, you can’t completely control the environment you are about to enter. You have to accurately judge your skills if you don’t have the requisite skill you definitely going to get a major trashing or even die. Even with the best judgement and all the skill in the world it could still go wrong. You only paddle the rapid, push 'your' envelope if the risks rewards of doing so mean you have too because that simply is what living means to you.   This risk/reward in the face of uncertainty is so personal and ever-changing throughout life that it can’t be assessed by anybody but yourself and there is no right or wrong answers. 

I think the smartest guys who recognise the uncertainty and don’t want – don’t need financially or psychologically to live a life in cognitive dissonance choose a path of lower return seeking.   I don’t think I’m far away from following them. Getting too old to be an adrenalin junky – yet I don’t know if I could enjoy life without pushing my investment boundaries so I’m not too certain when the switch for me comes.  Core – satellite is where I think I too will eventually head. So thanks to Sinner, Ves, Deep State etc  – the links and posts put up are read and appreciated even if not commented on.

Sorry for the ramble, writing it down helps - normally I delete, but maybe this strikes a chord somewhere.


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## sinner

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



> Sorry for the ramble, writing it down helps - normally I delete, but maybe this strikes a chord somewhere.




Woweeeeee golden stuff here craft.



craft said:


> Probably managed to get this thread of track more than most.
> 
> But to my warped line of thinking there is relevance in talking about uncertainty in an evidence based thread. *As the greater return you reach for the less robust the evidence becomes.
> *
> None of this evidence, just my beliefs. * If you stay in the markets long enough you get to know that you don’t and can’t know a lot of stuff.* (The beginner’s cycle of looking for certainty has finished) .




Also, studying history! The financial markets are older than 100 years and the lessons from before 1915 have proven to be not dissimilar to the lessons from after.



> What do you do next? Disbelieve that uncertainty must prevail and re-enter an advanced beginners cycle, there’s got to be something out there that I don’t understand yet that will give me the certainty – neural networks advanced academic theory something.




Having been through this exact process I can happily inform you that you merely end up circling around to the same realisation. 

Perhaps the only additional acknowledgement attained is that it is possible for high ROI "strategies" to begin working, continue working for just long enough to be attained by a critical mass of "winners" and then basically never work again. Ever. Sometimes due to short term economic circumstance, or whatever. I accept/acknowledge that it is possible to generate significant long term alpha by discovering, utilising and discarding these strategies at a high turnover. I made some machine learning stuff to do this but as it turns out the return profile is pretty much the same as selling options vol, superawesome during good times and "there goes your net worth" during bad times (so why not just sell some options vol).



> Lower the risk, comprehend that you can’t reach for the upside without opening yourself to the down side.  Couple of options now – get out completely, Risk only a small part of your wealth on high risk. Expose as much of your wealth as you can to lower risk strategies and perhaps a little more where the best evidence actually exists.




If you rely on only your experience in the markets then your ability to manage risk is significantly reduced. As a simple example, you state "get out now". "Getting out" normally entails going to cash. But most investors experience today does not include experience of a wide range of economic circumstance. Not many consider what an energy shock might do to their portfolio, or a currency crisis. This includes the "smartest people in the room" who often view reality through the lens bestowed upon them by their Harvard degree in Macroeconomics. 

Aligning with positive convexity in returns can be achieved for those who have the ability to identify unconsidered risks (be they behavioural, idiosyncratic, systemic, etc) and front-run purchase currently "undesirable" yet still "quality" assets before they are in demand due to whatever risk. 

A good example is purchasing a put option, another might be the globally diversified Permanent Portfolio. 



> Continue to chase high returns in the face of fully comprehended uncertainty.  To do this causes what I believe they call Cognitive dissonance, holding two completely opposing views at the same time.  This is very uncertain plus I still retain confidence.  Living your life with constant cognitive dissonance is very difficult – you will always want to ease it by reducing size, seeking out certainty or slipping into overconfidence and dismissing the risks. I think the exceptional traders can hold themselves in cognitive dissonance and keep the right balance between uncertainty and confidence.  For some reason I can maintain the required Cognitive Dissonance with Investing at the moment but I couldn’t with trading – IF I didn’t relieve the pressure by trading smaller I would become an emotional train wreck, the outcome didn’t matter up or down I couldn’t handle either at size.  That’s why I don’t trade anymore.   I couldn’t scale.




Yup, can empathise with this here big time. I started out trading leveraged FX and consider it mostly luck (certainly no skill on my part) that I didn't get my figurative head blown off on a liquidity event. After trading USDJPY during the night of the Flash Crash (May 6 2010) I started to develop mental scars, even though that night I had made money it was the first time I recognised how *luck*y I was the move didn't go the other way. That's when I started to look at other markets and moving away from intraday stuff and so on. After a while I quit intraday altogether. Events since then have left me feeling vindicated with my choice.



> I think the smartest guys who recognise the uncertainty and don’t want – don’t need financially or psychologically to live a life in cognitive dissonance choose a path of lower return seeking.   I don’t think I’m far away from following them. Getting too old to be an adrenalin junky – yet I don’t know if I could enjoy life without pushing my investment boundaries so I’m not too certain when the switch for me comes.  Core – satellite is where I think I too will eventually head. So thanks to Sinner, Ves, Deep State etc  – the links and posts put up are read and appreciated even if not commented on.




I feel like I have found a pretty happy balance, I keep most of the stuff generic and leave myself some room to play (I guess pretty much exactly the Core/Satellite that Ves described above).


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## galumay

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

craft, sinner, ves, that discussion is worthy of splitting off into a thread of it's own - and given how far its getting away from tech-a's initial question, probably should be!

The quality of your discussion on this last page is exceptional, its so thought provoking and resonated extremely srtongly with me. Its these sort of discussions that make ASF such a wonderful resource and I am humbled that you guys take the time and effort out of your lives to contribute to such discussions.

Its going to take me a coupe of readings, and following up on some of the references to fully absorb, but I felt like there was some lightbulb stuff in there - especially around the combination of intellect/knowledge/experience and the interface with human psychology.

Thanks again for your contributions, here and elsewhere on ASF.


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## The Falcon

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*

Yes I concur Galumay. Very good stuff guys, appreciate you taking the time.


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## barney

*Re: Looking for papers on Evidence Based Results for T/A and F/A methods/ideas/hypoth*



craft said:


> To do this causes what I believe they call Cognitive dissonance, holding two completely opposing views at the same time.  Living your life with constant cognitive dissonance is very difficult.
> 
> Sorry for the ramble, writing it down helps - normally I delete, but maybe this strikes a chord somewhere.




Another great post above thanks Craft

Slightly off topic but in relation to cognitive dissonance .......  musicians will appreciate the parallel, but for the non musical ......

One of the most harmonically appealing chords is the Major 7th chord (nearly every love song in the world has Major 7th chords......  

If we play say a DMajor7th chord it contains all the regular notes of a standard D chord plus an added C# (played up an octave higher)  ....

If you were to play a D and a C# note simultaneously (without being spread by the distance of an octave), it sounds more like the score from an Alfred Hitchcock movie:badsmile:, yet when the notes are spaced far enough apart the potential dissonance takes on a form of almost perfect harmonic beauty:engel: ...... 

Perhaps the frustrating dissonance we often find in trading is no more than having the "chord structure" in the wrong order!


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