Everyone participating in the financial markets is working models. These models can be implicit models we carry around in our heads or they can be explicit fundamental or technical models. The challenge for investors is recognizing that models are at best a simplification of reality. Therefore the manner in which we build models is important. Maybe more important is the way in which those models are executed. In today’s screencast we look at the challenge of model building.
Items mentioned in the above screencast:
Humans build models. Ergo, the models are flawed. (the research puzzle)
Pat Dorsey on the three sources of alpha. (Morningstar)
Behavioral finance and three sources of alpha. (Simoleon Sense)
On the limitations of sabemetrics in building a winning team. (Grantland)