In the stock market there is one school of thought called Trend Following where you-yep, follow the trend. Here's a shocker: some swear by it:
http://www.amazon.com/Trend-Following-Updated-Edition-Millions/dp/013702018X
while some say it doesn't work at all
http://www.followingthetrend.com/2014/04/trend-following-does-not-work-on-stocks/
I've tried it with stocks-usually I like to trade call and put options with mixed success. But I'm also thinking of sports or any kind of prediction you want to make.
I mean to put it very simply, if you have a team that's won 6 games in a row do you
1. Bet on it to win-ie, going with the trend?
2. Betting it to lose as you figure, correctly, that the winning streak won't go on forever?
If the team it's playing has itself lost 6 games in a row does that make the choice for 1-or 2-even more stronger?
A lot of people seem to go with 2 but my tendency I find is more often 1-though, then, of course, I second guess myself.
I guess I see in a way what the economists mean with their models: a model even with some erroneous assumptions can be better than having to basically reinvent the wheel every time you come to a question.
It seems to me that assumptions are necessary to get anything done-we have to start somewhere. Isn't that how experiments and hypotheses in science work? You make an educated guess which very well may be wrong but it gives you a launch pad. What if you're dead wrong? Well even so that can put you on the path to getting closer to the truth later.
Off topic, it seems that maybe David Romer has uncovered why me and Sumner can't have a civil, intelligent conversation:
"The alternative to science is academic politics, where persistent disagreement is encouraged as a way to create distinctive sub-group identities."
http://www.amazon.com/Trend-Following-Updated-Edition-Millions/dp/013702018X
while some say it doesn't work at all
http://www.followingthetrend.com/2014/04/trend-following-does-not-work-on-stocks/
I've tried it with stocks-usually I like to trade call and put options with mixed success. But I'm also thinking of sports or any kind of prediction you want to make.
I mean to put it very simply, if you have a team that's won 6 games in a row do you
1. Bet on it to win-ie, going with the trend?
2. Betting it to lose as you figure, correctly, that the winning streak won't go on forever?
If the team it's playing has itself lost 6 games in a row does that make the choice for 1-or 2-even more stronger?
A lot of people seem to go with 2 but my tendency I find is more often 1-though, then, of course, I second guess myself.
I guess I see in a way what the economists mean with their models: a model even with some erroneous assumptions can be better than having to basically reinvent the wheel every time you come to a question.
It seems to me that assumptions are necessary to get anything done-we have to start somewhere. Isn't that how experiments and hypotheses in science work? You make an educated guess which very well may be wrong but it gives you a launch pad. What if you're dead wrong? Well even so that can put you on the path to getting closer to the truth later.
Off topic, it seems that maybe David Romer has uncovered why me and Sumner can't have a civil, intelligent conversation:
"The alternative to science is academic politics, where persistent disagreement is encouraged as a way to create distinctive sub-group identities."
"The usual way to protect a scientific discussion from the factionalism of academic politics is to exclude people who opt out of the norms of science. The challenge lies in knowing how to identify them."
"Persistent disagreement is a sign that some of the participants in a discussion are not committed to the norms of science."
http://paulromer.net/mathiness/
Sumner would likely say I'm the culprit. However, Romer here is specifically thinking about 'mathiness'
Mathiness is a symptom of this deeper problem, but one that is particularly damaging because it can generate a broad backlash against the genuine mathematical theory that it mimics. If the participants in a discussion are committed to science, mathematical theory can encourage a unique clarity and precision in both reasoning and communication. It would be a serious setback for our discipline if economists lose their commitment to careful mathematical reasoning.
I don't know enough of the highfalutin economist math to even attempt mathiness-though I doubt Sumner does either come to think of it.
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