I just managed to finish the The Signal and the Noise: Why So Many Predictions Fail but Some Don’t [Note: This is an affiliate link], by Nate Silver. It was an enjoyable read from a personal perspective, but only because I just enjoy reading technical books written towards a laymen audience, such as this book, Fooled By Randomness, The Black Swan, etc. However, I didn’t really learn that much from this book, and I wouldn’t recommend it if you are knowledgeable about basic trading system design methodologies and problems.
Things that I learned:
- Philip Tetlock’s Hedgehog vs Foxes
- Reading about this was more of a refresher because I vaguely recall reading this somewhere else, but it was useful re-solidifying the information.
- While reading Falkenblog’s review of the Signal and the Noise, he mentioned John Cochrane’s opinion on the Hedgehog vs Fox debate which I found insightful
- The Frequentism vs Bayesianism debate
Things that I already knew:
- Financial data is prone to look-ahead bias
- Simpler models are often better
- Sometimes the data set does not provide signal, only noise
- More competition = less profits, especially for the less skilled
- Don’t over optimize models