On today’s episode of Trend Following Radio Michael Covel starts off with a short clip from Star Wars. Michael notes that Yoda and the force have unexpected connections with trend following. He then recounts a story that happened to him a few weeks ago where he feels “the force” was involved. While he was waiting to take a red eye to Tokyo with his parents a man asked if he could share the power outlet he was using. That man happened to be one of the world’s most famous computing pioneers. Michael agreed to share the outlet if he could take a selfie with him. It was a weird serendipitous moment that Michael attached “the force.”
Michael goes on to read from an article titled, “Meet David Harding: The Man Behind Models that Beat the Market,” published in The Australian Financial Review. The article highlights Harding’s accomplishments and views on trading. Harding stresses in the article that the only reason systematic trading has gotten big over the years is because it works. Harding’s company, Winton Capital Management, goes completely against the efficient market hypothesis and he has actually made massive money going against the theory. David goes on to say that investment management is an internal psychological war with yourself. You constantly doubt yourself but the challenge is rising above that self doubt and sticking with your system. If you allow every emotion to be built into your system then you do not have a system at all.
“Over-fitting and It’s Impact on the Investor” by the Man AHL Academic Advisory Board is Michael’s next interest. Over-fitting is finding patterns that aren’t actually there. It is a common phenomenon in science as well as trading and other fields of study. Analyzing a companies culture is a good way to produce less over-fitting results. Michael quotes different view points regarding the concept of over-fitting, finishing up with inspirational quotes by NBA player Kevin Garnett and Christopher Hitchens focused on “making it happen.”
In this episode of Trend Following Radio:
- Star Wars and “The Force“
- Efficient Market Hypothesis
- Over-fitting in trading
- Rising above self doubt
“You can’t teach the beast, its either in you or it isn’t. you cant just go to the store and buy a six pack of beast.” – Kevin Garnett
“The reason the systematic investing community has gotten big is because it is successful. No one should miss that point.” – David Harding
Mentions & Resources:
- David Harding
- “Over-fitting and It’s Impact on the Investor”
- “Meet David Harding: The Man Behind Models that Beat the Market”
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