May

5

When ideas that seem to hold promise intuitively don't pass the acid test, you wonder whether you left something out which may have been the key, eg, X-day high, index vs individual stock, different definitions of volatility, various lags, what other markets have been doing, which prior period assumed analagous, yield curve, inflation rate, tax regime change, seasonality, etc. Eventually you are likely to find something, and maybe put on a full-Kelly trade based on it. Then, as it goes against, you wonder whether you have overfit the data, or had so many hypotheses that you fooled yourself. Or, maybe just unlucky or unsuited to gambling?

Dr. Zussman is a trader, astronomer, philosopher and periodontist from Los Angeles.


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