Sunday, February 23, 2014

Why use models for investing?

Why we use models to help with the investment process:

  • Provides structure for discussion; We don't say …  "we feel the market is oversold".
  • Provides discipline; creates sameness with decisions.
  • Encodes history of markets through numbers.
  • Focuses discussion on where there are disagreements. Models serve as a null hypothesis.
  • Generates focus on where we are in the market cycle. 
  • Allows for "probability speak". We can talk about odds. 

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