How Sweet Briar Plans to Beat The Smartest Guys on Wall Street
Many of the ladies had the makings of really great models. I was especially intrigued by a model developed by Heather McPheeters and Andrea Jones designed to capitalize on opportunities in the currency markets. Lindsey Davis and Morganne Young also both seemed to have an excellent grasp of how to apply statistical prediction to making investment decisions.
I learned a lot by watching the presentations. On pages 6 and 7 of The Naked Portfolio Manager, I draw a clear distinction between judgment-based decisions (using your head or emotions to determine the course of action) and statistical-based decisions (using you head to create a rules-based method and then letting the method determine the course of action). By subordinating judgment to a set of rules, human error is reduced to a minimum. The review session gave me a chance to reinforce this concept.
After the presentations, the Professor and I had the opportunity to talk. He's confident that the models the students created will compare favorably with the top performing mutual funds and he said he's looking forward to tracking the results in 2010. While several of the students made excellent presentations, there was one young lady who demonstrated an incredibly profound grasp of rules-based strategies. More about her tomorrow.
[By the way, if your reading this at Sweet Briar and you don't have a copy of The Naked Portfolio Manager yet, I think the bookstore still has a few copies!]
Labels: emotions, human error, rules, Sweet Briar
