Top Traders Unplugged
SI310: The Illusion of Backtests and True Drivers of Price ft. Richard Brennan
Aug 24, 2024
Richard Brennan, an expert in volatility and investor behavior, shares insights on the recent market turbulence, comparing it to airplane turbulence as a metaphor for volatility. He argues against the reliance on backtesting for predicting future performance, advocating for more realistic expectations of risk and returns. The conversation highlights how human behavior influences price movements and discusses the role of trend followers in this dynamic. Brennan also addresses the benefits of including highly correlated assets in trend-following portfolios.
01:03:26
Episode guests
AI Summary
AI Chapters
Episode notes
Podcast summary created with Snipd AI
Quick takeaways
- The recent market volatility highlighted the need for psychological discipline among trend followers, akin to how airplanes endure turbulence without structural damage.
- Backtesting's limitations can misguide investors; adopting a walk-forward testing approach enables more realistic assessments of trading strategies and their future performance.
Deep dives
Navigating Market Volatility
Recent market volatility, particularly early in the month, raised concerns among investors, but trend followers adapted quickly to change. Despite initial fears of a major downturn, the market exhibited a swift recovery, demonstrating the resilience of systematic strategies. Analysts emphasized that such volatility events are often short-lived, and successful trend-following models can pivot accordingly. Maintaining a defensive position during these periods can be critical for long-term investment success.
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
