Should The Method Be Revealed?
January 15th 2007 12:41
The writer was asked on several occasions to reveal the methodology used to select the shares for Portfolio 1.5-EW and the newly formed Portfolio 701, of which the methodology is term as "fundamental technicality" factor. Vague, as the jargon does not provide any concrete meaning other than a scant understanding that it involves some fundamental and technical analysis.
The question of revealing the methodology depends on whether the price is worth it or not and assuming mass replication thereafter the revealation, the abnormal returns from the anomaly/method will dissipate in the long run and the objective of the portfolios to beat the market will be defeated. Might as well invest in the index.
Yet there are countless financial research papers revealing all sorts of strategies and methodologies through journals and conferences which drives a question; don't they, the researchers, want to profit from thier newly discovered or refined tricks? Are they being rational or irrational?
From the paper, "So You Discovered An Anomaly... Gonna Publish it?" by Colby Wright of Florida State University, the answer is rational but only under certain circumstances with respect to reputation and incentive building. In other words; publish it to be known.
So will the writer reveal the methods now?
Probably not as the writer do not belong to the academia. Hence, there are no incentives.
The question of revealing the methodology depends on whether the price is worth it or not and assuming mass replication thereafter the revealation, the abnormal returns from the anomaly/method will dissipate in the long run and the objective of the portfolios to beat the market will be defeated. Might as well invest in the index.
Yet there are countless financial research papers revealing all sorts of strategies and methodologies through journals and conferences which drives a question; don't they, the researchers, want to profit from thier newly discovered or refined tricks? Are they being rational or irrational?
From the paper, "So You Discovered An Anomaly... Gonna Publish it?" by Colby Wright of Florida State University, the answer is rational but only under certain circumstances with respect to reputation and incentive building. In other words; publish it to be known.
So will the writer reveal the methods now?
Probably not as the writer do not belong to the academia. Hence, there are no incentives.
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