This is not a project like blog. This is not about 'hey see this is how I think about stuff.' but this is more about me keeping myself accountable and in the process generating value for others.
I have been an investor in equities for more than 10 years. The performance of my investments has been mediocre at best. All these years I spent countless hours creating algorithms, testing them and using them for investing. Except for last year, in all other years the broad market indexes have beaten my investment performance. Last year was the only year that saw my performance consistently exceeding the market performance. What changed?
I started trusting the algorithms and took my own judgement out of the investing process. This may sound simple for lot of people. Investing is always about following numbers, then why should an investing rational human follow own (always biased) judgement? This is easier said than done. I have not talked to traders but have observed trading behavior and except for machines no one follows this process. In other words, our rational selves are easy to imagine and design but it is extremely difficult to make humans act in perfectly rational ways. This is true even when we are willing to ignore our biases.
In short, I would like to follow the idea of rule-based investing to its extreme. Please note that I am not a 'Quant'. I have a terminal degree in a quantitative field but I come up with extremely naive and simple algorithms. These algorithms do not make any assumptions about the underlying data generating process. It uses ideas from Statistics only to test hypotheses. There are no statistical distributions and use of variables other than prices and volumes is strictly avoided.
The idea is to show that even naive algorithms can beat broad market averages provided that the algorithms are followed accurately.