With the start of a new year, we expect an onslaught of “as goes January, so goes the year” posts. It is fitting, then, to revisit a blog we wrote on this topic in January of last year.
Newfound blog: the unreasonable effectiveness of simplicity when it comes to tactical or strategic portfolio construction.
While we normally point to the persistence of momentum across asset classes, geography, and history as evidence that it must be an innate factor within market participants, I came across an interesting New York Times article from 2007 about a study that exhibited momentum in a very different field.
At Newfound, we argue that for models to be successful and robust in uncertain environments, they must be based on simple heuristics tied to a fundamental or economic concept, not based on complex decision rules.
An interesting rebuke to the oft-quoted 2010 paper “Growth in a Time of Debt”1 by Carmen Reinhart and Kenneth Rogoff was recently announced.
In his book The Signal and the Noise: Why So Many Predictions Fail — but Some Don’t, Nate Silver discusses the many subtleties of developing and utilizing predictive models.
Past performance is not a guarantee of future results.
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