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Strategies & Market Trends : Free Float Trading/ Portfolio Development/ Index Stategies
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From: dvdw©4/1/2008 12:49:34 PM
of 3821
 
The day after opening day, Ahha, hits a home run against the artifact of price. AHHA 1-price 0, its a long season, but 1-0 is better than 0-1.

From: ahhaha 4/1/2008 11:59:58 AM
of 10984

Speaking of bullshit, I'm listening to a commercial on CNBC about trading software. The buzzword? Back test.

The idea here is, when one comes up with some silly theory about predicting stock price, one can use their silly simpleton software to take historical data, subject it to a rule or algorithm characterizing the theory, and thereby get an idea about how the theory would have worked in the past.

Let me render that software useless. I can prove that ALL rules and algorithms using any data will fail. It is possible to be fooled though by coincidentally finding some nonsensical rule that just happens to correlate with some set of time series data. This is similar to getting on a gambling win streak in Beggas, what we in math call, a "run", and then take the view that the streak was due to skill at gambling.

What is the proof? There can't be any more information in the data than there is in the data! Why, that's a tautology, not a proof. Back testing is equivalent to asserting that there's more information in the data than there's in the data. QED.
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