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Why is John W. Henry a Winner?
Simple Heuristics That Make Us Smart
Background: Simple Heuristics That Make Us Smart (intro)
Background: Simple Heuristics That Make Us Smart (abstract)
Background: Simple Minds, Smart Choices
...we often get the recurring question: why is your method successful? This is
No. 1 Source for Trend Following Worldwide
Est. 1996 | Clients in 67 Countries
especially the case when there is so much fundamental information available to
use in making decisions. We think that our success has been based on simplicity;
nevertheless, there often is a bias by some investors away from the simple
manager in favor of those who discuss and try to account for the complexity of
markets. To some, simple means unsophisticated; but there is a growing body of
research work which suggests that simple methods of decision-making actually
outperform their more complex alternatives. This certainly may seem counter-
intuitive; but in a complex world where decisions have to be made with limited
information and face real world time constraints, there may not be the ability to
optimize over all possible alternatives. Under the real life situations faced by a
trading firm, there is a premium on “fast and frugal” decision-making or
heuristics. Fast decision-making is often based on just a few cues or inputs that
may seem relevant. There is actually value in not using too much information.
Researchers have found through testing that simple decision rules often can
perform as well or better than more sophisticated forms of decision-making –
especially when there is a high degree of uncertainty.
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