NOISEHUNTLAB

Market games

Short games built on real prices and honest statistics. Each one ends by comparing you with what chance alone would do, and states its own limits.

• Noise Hunt: Why most backtests lie: Search a price chart for a winning trading rule. You will find one. Then bet on whether it is real.
• Real or Random?: How random real prices look: Ten pairs of charts. One is a real stock, one is a random walk. Can you beat a coin flip?
• The Star Manager: Skill, luck and fees: Two hundred fund managers, three years of track record. Hire the best, then live with it: keep, switch or give up, one year at a time.
• How Bad Can It Get?: Value at risk and its blind spot: Set a worst-day limit for a real portfolio, then let the next real year test it. Count the breaches, and see what the days beyond your limit look like.
• Size the Bet: Position sizing and the risk of ruin: Every trade wins 60% of the time, and you have 100 of them. Bet too little and you crawl; bet too much and one bad streak ends the game. Find the size that grows.
• The Frontier: Diversification and estimation error: Five real stocks and their last three years. Build a portfolio, see how close you came to the efficient frontier, then watch the year after test the "optimal" one.
• Name the Factor: Factor exposure versus skill: A fund that beat the market. Take it apart into market, size, value and momentum, then decide: was any of it skill?
• Options School: The arithmetic of options: Six short episodes on why so many retail option traders lose money: cheap options, time decay, events, selling, costs and lot size. In rupees, with simulated prices.
• Portfolio Challenge: Risk you cannot sit out: Three to ten real stocks, $100,000 and a year of history replayed day by day. Hit the target within your limits, then see how you did against your starting mix left alone, an equal-weight mix and the index.
• Calm or Storm? (coming soon): A real stock's last month: will next month be calmer or stormier? Calm and stormy spells tend to persist, so volatility is often easier to forecast than the price, though forecasts still miss.

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