Campbell Harvey on Randomness, Skill, and Investment Strategies

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4.7 • 4.4K Ratings

🗓️ 23 March 2015

⏱️ 65 minutes

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Summary

Campbell Harvey of Duke University talks with EconTalk host Russ Roberts about his research evaluating various investment and trading strategies and the challenge of measuring their effectiveness. Topics discussed include skill vs. luck, self-deception, the measures of statistical significance, skewness in investment returns, and the potential of big data.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty.
0:06.4	I'm your host Russ Roberts of Stanford University's Hoover Institution.
0:11.0	Our website is econtalk.org where you can subscribe, comment on this podcast, and find
0:16.0	links and other information related to today's conversation.
0:19.0	You'll also find our archives where you can listen to every episode we've ever done going
0:23.2	back to 2006.
0:25.4	Our email address is mailadycontalk.org.
0:27.4	We'd love to hear from you.
0:29.4	Today is March 6, 2015, and my guest is Campbell Harvey, professor of finance at the Fuqua
0:37.7	School of Business at Duke University, and a former editor of the Journal of Finance,
0:42.4	Campbell Welkeby-Con Talk.
0:43.4	It's great to be on the show.
0:46.7	Our topic for today is its substance randomness, one of the deep ideas in thinking about complexity
0:52.0	and causation.
0:53.8	As a jumping off point, though, we're going to use a recent paper you wrote with Yan Liu
0:57.8	evaluating trading strategies, which was published in the Journal of Portfolio Management.
1:03.8	And we may get into some additional issues along the way.
1:07.0	Let's start by reviewing the standard way that we evaluate statistical significance in
1:11.9	economics, for example, or other applications of regression analysis.
1:17.2	You'll hear people talk about a T statistic being greater than two.
1:21.1	And what is that represent?
1:22.3	What's the, what are we trying to measure there?
	...

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