SI273: Unraveling the Mystery of Complex Adaptive Systems ft. Richard Brennan

Top Traders Unplugged

Niels Kaastrup-Larsen

Business, Business News, Investing, News

4.8 • 670 Ratings

🗓️ 9 December 2023

⏱️ 68 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

How do you avoid overfitting, how loose is too loose in terms of loose pants and how should you approach sample sizes when designing your trading systems? What are complex adaptive systems, how do they apply to financial markets and why does regular math just not cut it? How does trend following differ from other strategies, what makes trend following so robust and what are the limitations for traditional statistics? Join us for this fascinating conversation with Richard Brennan.

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Episode TimeStamps:

01:04 - What has been on our radar recently?

03:08 - Industry performance update

08:21 - Q1, Adam: In terms of loose pants, how loose is too loose?

13:36 - Trading with different models

15:42 - Adam Q2: What is a reasonable sample size in real trade observations, to compare against backtest statistics?

18:23 - A deep dive into complex adaptive systems (CAS)

20:29 - The 5 properties of CAS

25:24 - Examples of non-linearty in financial markets

30:50 - Emerging properties in financial markets

33:59 - Self organization

36:33 - Adaption and evolution

40:10 - Feedback loops

43:11 - What does CAS and trend following have in common?

49:38 - The limitations of traditional statistics

01:01:14 - Summing it all up

01:04:48 - What's next?

Transcript

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0:00.0	You're about to join Neil's Kostrup Larson on a raw and honest journey into the world of systematic
0:06.6	investing and learn about the most dependable and consistent yet often overlooked investment strategy.
0:13.2	Welcome to the Systematic Investor Series.
0:26.8	Welcome and welcome back to this week's edition of the Systematic Investor series with Richard Brennan and I, Neil's Castablastin, where each week we take the pulse of the global markets
0:30.7	through the lens of a rules-based investor. Rich, it is wonderful to be back with you this week.
0:37.1	How are you doing down under?
0:38.8	Very good news, but very hot. It's decided to turn on the sunshine in December down here in Australia,
0:44.5	so it's boiling here at the moment, but I've got all of the fans going and I hope it cools down a bit.
0:52.5	Yeah, well, actually, I'm also in a place right now
0:55.0	where it usually is pretty hot even in December,
0:57.8	but there's a nice cool breeze coming through these days,
1:01.0	so I'm not struggling as much as you are.
1:04.3	Rich, as usual, before we dive into a question or two that we have,
1:09.7	and also a very interesting topic that you brought along.
1:15.3	I just wanted to find out a little bit of what's been on your radar recently,
1:19.4	what you're finding interesting when you look at the world at large.
1:24.4	Well, what I found was that I had a pretty good result for November, and that's because my
1:29.7	portfolio doesn't have much bond exposure.
1:32.8	So I came out of November a bit cocky, thinking that, you know, I'd done quite well in comparison
1:38.2	to a lot of the other CTAs that might have had a bit of difficulty because of the bonds over
1:42.8	the month of November.
1:44.8	And so here I was bit cocky at the end of November,
	...

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