Northern Exposure: The Paradox of Skill

In What’s the Significance, we addressed the importance of considering statistical significance when drawing conclusions from noisy data. Noise in the data is problematic when investors overemphasize what might have been a period-specific outcome rather than a robust and repeatable result that is likely to persist going forward. Manager selection is a process that requires analyzing noisy performance data, so it should lean heavily on the notion of statistical significance.

via Northern Exposure: The Paradox of Skill.

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