Steve Mayo![]() Legend ![]() ![]() ![]() ![]() Posts: 414 Joined: 10/11/2012 Location: Austin, TX ![]() | >> Do you think results from testing two portfolios is sufficient to draw the conclusion that portfolio switching will improve results on most sets of portfolios in most markets? << I started my career in clinical research as part of the team that developed, studied and obtained regulatory approval for ibuprofen. Now, after 30 years, can I tell you that ibuprofen is absolutely safe and effective under every conceivable scenario? Absolutely not. But, I can say with a level of confidence that, based on well-controlled studies, it is a pretty good choice to treat a headache. And, with my limited understanding of how ibuprofen works at the cellar level, I can say it will probably work just as well for other types of pain. If I’m having a heart attack and have left my bottle of aspirin at home, I will probably take it for that too, but I have no evidence to know if it will work. Give me 30 years and few $billion and I still won’t be able to answer your (obviously rhetorical) question. All Mark and I have said is that the result we are getting with our particular system has some statistical validity, and it looks like the technique has fairly broad potential. For example, the accompanying attachment shows our switching technique applied to another set of portfolios. >> IMHO, there is no benefit to sudden changeover. A blended shift makes more sense to me. << Linus Pauling told us that vitamin C could cure the common cold. After more than 30 trials over 40 years have shown otherwise, a lot of people still swear it works. As traders, and as patients/consumers, we all have our entrenched beliefs, most of which have little empirical evidence to support them. I can test a hard-cut switch each month and reasonably quantify the sources of error (commissions, MOC vs. MOO entry, the robustness of the underlying OV simulations). Conversely, I can’t currently simulate a phased-in switchover with enough confidence to draw any conclusion because it introduces a new hard-to-quantify source of error (which trades will be missed while the equity is tied-up by the carry-over trades). It’s a completely different scenario and the outcome of our work should not be extrapolated to that new scenario >> Why not have the [Nirvana] engineers figure out what works…put a bow on the best…and make it easy for users to deploy? << Just like we all want pharmaceutical companies to give us a little pill that instantly cures our cold with absolutely no side-effects and demand they do it immediately, we want companies like Nirvana to give us that elegant solution that guarantees us huge profits. Oh, if it were only that easy! Mark and I put in hundreds of hours testing various approaches, most of which were failures. And there are thousands more (as many posts have point out) that we haven’t tested. For the same reasons we shouldn’t expect the pharmaceutical industry to develop a new drug until there is enough evidence to support that a viable treatment is within reach, it is unrealistic to expect Nirvana to undertake low-level experimentation until there is a clear market demand and associated commercial viability. In medicine, basic science is done by academia using government funding. For trading systems, that basic science can only be done by interested zealots like Mark and I (and you guys that reads these posts). Let’s recognize that the handful of engineers at Nirvana, as intelligent and creative as they are, could never accomplish as much as several hundred N-Club members all approaching the difficult basic research tasks from different angles. Let’s all rise to that challenge, test our theories and make our proposals, and let Nirvana focus on those with the broadest commercial viability and the greatest benefit to all. [Edited by Steve Mayo on 3/31/2014 5:06 PM] ![]() |