MacroRisk Analytics makes Ph.D-grade economic insight almost RIA-friendly

This topic is a good one. The study and understanding of the scientific method and seeking an evidence/data-basis for RIA, and financial services, claims, beliefs, communications and behaviors would be a real improvement for all. It will take time.

It is important to remember that most financial services research and economics is largely post hoc analysis and descriptive not predictive. Economics, as a science, has a long way to go in adopting real evidence-based theories and experimental proof for explanations and predictions — as history proves.

Here is one of the challenges: “Asset management is another domain where skill is generally believed to be important, as evidenced by consumers paying billions of dollars annually in fees to money managers. Academic analysis, however, has generally found little evidence for skill in this domain as demonstrated by low rates of persistence in mutual fund returns (Carhart 1997, Bollen and Busse 2004) and evidence of inferior or superior performance only in the extreme tails of the mutual fund distribution (Fama and French 2010).” Steve Leavitt (Freakonomics author)

“The first principle is that you must not fool yourself—and you are the easiest person to fool. So you have to be very careful about that.” Feynman (physicist)