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Howard wrote:
<<Unfortunately, Mr. O'Shaughnessy's models don't work so well. His
Cornerstone Growth strategy, which he considered the best one to trade after
doing all his research, is down 28% year to date (based on O'Shaughnessy
Cornerstone Growth mutual fund.>>
First of all, have you read the interview with Mr. O'Shaughnessy in Stocks
and Commodities?
His funds' year to date performances are as follows:
OSCVX -4.85%
OSCGX -28.66%
OSAGX -24.18%
OSDGX -3.00%
Now that we've looked at that, let's return to the point of his research.
It is this: in many fields of human endeavor, whether it is diagnosing
patients, judging candidates for college admissions, judging parolees,
deciding on loan applications, or managing money, the objectively formulated
"quantitative/actuarial" models consistently outperform the models based on
judgment, the "intuitive/clinical" models. This is simply how things are.
Mr. O'Shaughnessy reports that he originally approached his research
thinking of the quantitative/actuarial models as a floor from which he could
rise by adding his own intuition. It turned out that the models were a
ceiling which humans could not surpass.
Look... am I making all of this up? I have no axe to grind. I am simply
reporting what the research has found - which is this: the backtested
models work better than the intuitive models, over the long haul, in many
fields of human endeavor, including investing.
Good trading,
The Omega Man
-----Original Message-----
From: HBernst963@xxxxxxx <HBernst963@xxxxxxx>
To: editorial@xxxxxxxxxxxxx <editorial@xxxxxxxxxxxxx>; flag@xxxxxxxxxxxx
<flag@xxxxxxxxxxxx>; omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Monday, October 12, 1998 6:55 AM
Subject: Re: WHY BACKTESTING WORKS
Unfortunately, Mr. O'Shaughnessy's models don't work so well. His
Cornerstone
Growth strategy, which he considered the best one to trade after doing all
his
research, is down 28% year to date (based on O'Shaughnessy Cornerstone
Growth
mutual fund.
Howard
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