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« The Role of Financial Blogs - Part 2 | Main | The Three Amigos -- A True Story »

September 11, 2007


Bill aka NO DooDahs!

ROFLMAO! Physician, heal thyself!

One of the first things I do to examine a writer's or commentator's process is look to see where they stood at turning points in the economy, and whether they have been consistently wrong in calling for recessions and stock market collapses. When I see someone that has predicted 4 or 5 of the last 0 stock market collapses, I say to myself, "There's a man with a c#@%%y set of processes."

Keeping with Dash's "predicting rare events" theme, since recessions happen about once every five years, the accuracy standard to be measured against isn't 50% accuracy – it's 80% accuracy. One can hit 80% by saying "no recession" each and every year. Should I research anyone's accuracy on that regard?

Barry Ritholtz

Then you should change your process . . .

Bill aka NO DooDahs!

But a long history of poor results (in managing money or in making economic predictions) does indicate a problem with process.


hey Jeff, I'd be glad to help, lol.

I think you were referring to this though I'm not positive.

Thanks either way.

Barry Ritholtz

You have hit on a key element that many investors have trouble with: They focus on the results and not the process.

As fund of funds proliferate, and hedge funds are now asked about their WEEKLY performance, this issue is only going to become more significant -- even amongst the so-called pros.

Anyone who has ever dealt with retail brokers or their clients for an extended period of time (as I have) knows all about the Halo effect, the hot hand, and all sorts of other myths.

Until investors focus on their process, they are doomed to fear, inconsistency, and underperformance . . .

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