STREET DOGS: Steer clear of market-pattern claims
The incentives to find a pattern are huge and the costs are minimal
From Jason Zweig: The problem of "p-hacking", or dredging through an ocean of data until you find a pattern you can present as statistically significant, is endemic to research in finance. You should approach all claims of market-beating patterns with extreme scepticism. Campbell Harvey, a finance professor at Duke University, estimates that at least half of all "discoveries" in investment research (thus the expectations of investors in funds based on them) are false … that so much data is available in finance that someone searching for a pattern "predicting" outperformance is all but certain to find one — even by statistical fluke alone. The incentives to find a pattern are huge and the costs are minimal. Supply a smart young analyst with a computer and plenty of pizza and in a matter of days or weeks you will have a set of data full of patterns – many of them probably spurious — that you can market to investors. In the US you can now buy exchange-traded funds that own the 60 stock...
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