Is the stock market weaker during mid-term election years?

A recent Globe and Mail blog repeats an oft-cited claim that the U.S. stock market is weaker in mid-term election years (MTEYs). According to this blog, stock markets “have traditionally been weaker than normal during mid-term election years. Price returns during these four-year cycle lows have been atypically negative in January, but then frequently favorable

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FAQs on Backtest Overfitting

Our recent papers [1,2] on backtest overfitting have attracted significant interest, including several press releases [1,2] and news articles. The feedback so far has been encouraging, and numerous colleagues have approached us with interesting questions and requests for clarification. This blog lists and responds to a number of these items.

1. Why do so many

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Pseudo-mathematics and financial charlatanism

The rise of quantitative investing

With the dramatic increase in computation power available in recent years, quantitative methods are gaining momentum in the finance world. The results, however, are mixed. The Renaissance Fund, founded by brilliant mathematician James Simons, has produced an average annual return of 35%, after fees, over a period of 25 years.

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A sobering analysis of financial gurus’ market forecasts

CXO’s evaluation of forecasters

The CXO Advisory Group of Manassas, Virginia, which offers “objective research and reviews to aid investing decisions,” has just published an interesting evaluation of equity market forecasts. Titled Guru Grades, the column concludes that the class did not do very well!

CXO evaluated a total of 6582 forecasts for the U.S.

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Lopez de Prado and Bailey speak at “Battle of the Quants”

On Wednesday March 26, 2014 at 11:15am Marcos Lopez de Prado and David H. Bailey, two of the bloggers on this site, jointly presented a talk How to spot backtest overfitting at the Battle of the Quants meeting in New York City.

The Battle of the Quants conferences, organized by Bartt C. Kellerman of Global

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The “scary chart” fallacy

A “scary chart” has recently made the rounds of numerous financial analysts and news commentators. It exhibits what appears to be a disturbing parallel between the current U.S. stock market and the DJIA in the period (1928-1929) just prior to the 1929 crash. A MarketWatch.com article, for instance, warns that if the U.S. stock market

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The Mathematical Investor: A personal perspective by QJZ

[Editorial note: During the next few weeks, each of the editors of the Mathematical Investor will provide, in an essay format, some personal background explaining the origins of their interest and work in this area. This is a perspective essay by Qiji J. Zhu.]

Education and research

I entered college and started my academic career

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Fedspeak, Karl Popper and market directions

“Risk takers have been encouraged by a perceived increase in economic stability to reach out to more distant time horizons. But long periods of relative stability often engender unrealistic expectations of it[s] permanence and, at times, may lead to financial excess and economic stress.” — Alan Greenspan, testimony before the House Financial Services Committee on

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Seminar at the International Association for Quantitative Finance

The Mistress of Investment Management

Until a few years ago, applied mathematics had a very limited role in the financial profession. Standard applications involved pricing of derivative products and convex portfolio optimization. But with the advent of High-Frequency Trading and Big Data, Mathematics is now pervasive. Today, virtually every investment decision requires the analysis of

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The Mathematical Investor: A personal perspective by JMB

[Editorial note: During the next few weeks, each of the editors of the Mathematical Investor will provide, in an essay format, some personal background explaining the origins of their interest and work in this area. This is a perspective essay by Jonathan M Borwein.]

Early interest in economics and finance

I went to Oxford

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