What can baseball, wine pricing, medical diagnosis, university admissions and criminal recidivism teach us about the markets? My good friend James Montier thinks there is a lesson to be learned and explains it in his Global Equity Strategy newsletter.
James is the Director of Global Strategy at Dresdner Kleinwort Watterstein, a London and Frankfurt based investment bank. He is also a prolific writer and author of the book Behavioral Finance - Insights into Irrational Minds and Markets.
In his article "Painting by Numbers: An Ode to Quant," James discusses the role of statistics and the value that it provides. He further discusses the psychological implications that investors face as a result of quantitative versus qualitative decision making. While this is not something our egos will like to read, I do believe that you will truly find this to be a thought-provoking piece.
John Mauldin, Editor
Outside the Box
Painting By Numbers: An Ode To Quant
Don't worry dear reader, there will be no gratuitous use of poetry in this missive, despite the title - I promise. However, pause for a moment and consider what baseball, wine, medical diagnosis, university admissions, criminal recidivism and I might have in common.
The answer is that they all represent realms where simple statistical models have outperformed so-called experts. Long-time…