SI149: Model Anxiety & Algorithm Aversion ft. Mark Rzepczynski

Top Traders Unplugged

Niels Kaastrup-Larsen

Investing, Business News, News, Business

4.8 • 712 Ratings

🗓️ 18 July 2021

⏱️ 68 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

Mark Rzepczynski joins us this week to discuss ‘algorithm aversion’ and the science of how ‘model anxiety’ shows investors to be naturally wary of rules-based systems. We also discuss how to evaluate momentum data, how a busy week for market news can still be a quiet week for Trend Followers, the benefits of moving away from ‘peak complexity’ as soon as possible, why having too many filters can expose a trader to large opportunity costs, the optimal percentage amount of risk per trade, as well as portfolio construction versus signal generation and which is more important.

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50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HERE

In this episode, we discuss:

How behavioural finance leaves investors under-allocated to Trend Following strategies
How to perceive momentum data
Why the steady flow of market news often has little value for Trend Followers
Embracing simplicity
The need to avoid too many filters in your system
How much should be risked per trade

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Episode TimeStamps:

00:00 – Intro

01:49 – A huge thank you to listeners of the show for leaving your 5-star reviews on iTunes

03:02 – Macro recap from Niels

04:48 – Weekly review of performance

11:59 – Q1; James: What are your views on momentum indicators diverging against price action?

24:56 – Q2; Frank: What is your view on the relationship between the stop and the look-back period?

28:52 – Q3; John: Is the 2% rule still a popular and good risk-per-trade today?

35:56 – Q4; Mark: Would you ever not take a trade because it seems so absurd logically?

40:11 – Q5; Frederick: Do you think people are underinvested in CTAs because they want to feel in more ‘in control’ than a systematic approach would allow them to?

45:34 – The calculus of business cycles

48:51 – Narrative ambiguity versus model clarity

50:53 – How to handle depreciating cash

54:04 – The power of weather shocks

58:01 – Do we need inflation futures?

59:58 – Curve play in bonds

01:02:11 – Hayek co-ordination problem and recovery

01:04:57 – Benchmark performance update

01:05:57 – Next week we have Richard Brennan joining us on the show, so send in your questions

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PLUS: Whenever you're ready... here are 3 ways I can help you in your investment Journey:

1. eBooks that cover key topics that you need to know about

In my eBooks, I put together some key discoveries and things I have learnt during the more than 3 decades I have worked in the Trend Following industry, which I hope you will find useful. Click Here

2. Daily Trend Barometer and Market Score

One of the things I’m really proud of, is the fact that I have managed to published the Trend Barometer and Market Score each day for more than a decade...as these tools are really good at describing the environment for trend following managers as well as giving insights into the general positioning of a trend following strategy! Click Here

3. Other Resources that can help you

And if you are hungry for more useful resources from the trend following world...check out some precious resources that I have found over the years to be really valuable. Click Here

Disclaimer

Transcript

Click on a timestamp to play from that location

0:00.0	You're about to join Jerry Parker, Maritz Siebert, and Nealz Kostrup Larson on their raw and
0:06.9	honest journey into the world of systematic investing and learn about the most dependable and
0:11.8	consistent yet often overlooked investment strategy. Welcome to the systematic investor podcast series.
0:22.5	Hey everyone and welcome back to this week's edition of the systematic investor series
0:26.9	with Mark Resensinski and I, Niels Karzalsalsh, where each week we take the polls for the global
0:31.4	markets through the lens of a rules-based investor.
0:35.1	For those of you who are regular listeners, our conversations are intended to give you as much of the nurture and encouragement
0:40.8	as the turtles got back in the 1980s, as Jerry puts it.
0:45.2	And if you're new to the show, we hope that today's episode will trigger your appetite
0:49.1	to learn more by diving into the back catalog and listen to all of the past episodes that you may have missed,
0:55.8	like last week's episode with Jerry, where we took an unexpected journey down memory lane
1:01.0	to discuss how the landscape of investors in trend following has evolved during the last three decades,
1:07.6	which may surprise some of you. So I invite you to listen to this if you missed it.
1:13.6	Mark, always great to be back with you. How are things where you are in the Northeast?
1:18.7	Good. We're in the middle of summer, so town is a little sleepy that I'm in because I think
1:23.9	a lot of people are out at their summer homes and such, but things are going well.
1:33.9	There are a lot of activity in the market, so there's enough to keep you in a chair and keep your head scratching on what to do next.
1:35.2	Indeed.
1:44.0	We've got a great lineup of questions from James, Frank, Mark, John, and Frederick, as well as some other topics that you brought along. But before we
1:45.7	dive into those, I wanted to do my market wrap as usual. But actually, before I do that,
1:51.4	I just wanted to acknowledge and give a shout out to those of you who left the rating and
1:55.6	review this week. As you know, we so appreciate this. And in particular, there was one very
	...

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