Tuesday, August 21, 2007

Statistics No Substitute For Intuition

Ssome investors have come to believe that old-fashioned intuition and rational motive-based economic analysis is obsolete. Instead, what works are advanced mathematical models based on historical patterns. Well, that may work sometimes. But as many of them have come to experience recently, it doesn't always work that way. As the Washington Post notes, these so-called Quant Funds have lost really big money recently, as their "scientific" models failed to predict movements that was 25 standard deviations from the normal.


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