One area where we can see that the Lindy effect is empirically false is stock prices. If it were true, you could buy a portfolio of the 100 stocks that have gone up the most over the last 3 years, hold them for 3 years, and beat the S&P 500. But that doesn’t work.
… your link straightforwardly show the opposite? Momentum investing is moderately profitable in the first years before reverting to the mean as the momentum subside.
Similarly, you can find plenty work on the subject on the wiki page for the Lindy effect, notably connections with Zipf’s law and the Pareto distribution. (The term “Lindy effect” itself was coined by Nassim Nicholas Taleb.)
Equity research analysts and institutional investors don’t approach financial modelling or earning estimates through blind extrapolation, or by applying a rule of thumb like the Lindy effect. They think causally, often in great detail, about companies’ future performance. And, even then, accurate forecasting is really hard.
True and neither Scott nor I said otherwise. You should have a broad prior distribution and after gaining more evidence about the gears level you should update. On the other hand it is also, uh, not true that quants can ever afford to be always strictly rigorous and not using rules of thumbs of similar caliber.
… your link straightforwardly show the opposite? Momentum investing is moderately profitable in the first years before reverting to the mean as the momentum subside.
Similarly, you can find plenty work on the subject on the wiki page for the Lindy effect, notably connections with Zipf’s law and the Pareto distribution. (The term “Lindy effect” itself was coined by Nassim Nicholas Taleb.)
True and neither Scott nor I said otherwise. You should have a broad prior distribution and after gaining more evidence about the gears level you should update. On the other hand it is also, uh, not true that quants can ever afford to be always strictly rigorous and not using rules of thumbs of similar caliber.