Preface
1. Ernest Shackleton, “Men Wanted (advertisement),” Times , London, 1913.
2. Timothy W. Martin, “What Does Nevada’s $35 Billion Fund Manager Do All Day? Nothing,” Wall Street Journal, October 19, 2016, www.wsj.com/articles/what-does-nevadas-35-billion-fund-manager-do-all-day-nothing-
1476887420 .
3. Jason Zweig, “Making Billions with One Belief: The Markets Can’t Be Beat,” Wall Street Journal , October 20, 2016, www.wsj.com/articles/making-billions-with-one-belief-the-markets-cant-be-beat-1476989975 .
4. “Efficient Market Hypothesis,” Wikipedia , last modified December 11, 2016, https://en.wikipedia.org/wiki/Efficient-market_hypothesis .
5. Jean-Philippe Bouchaud and Damien Challet, “Why Have Asset Price Properties Changed So Little in 200 Years,” May 2, 2016.
6. Jean-Philippe Bouchaud, “Economics Needs a Scientific Revolution,” Capital Fund Management, December 1, 2008.
7. David Harding, “Efficient Market Theory: When Will It Die,” Winton Capital Management, February 2016.
8. “David Harding (financier),” Wikipedia , last modified December 11, 2016, https://en.wikipedia.org/wiki/David_Harding .
9. Harding, “Efficient Market Theory.”
10. Katie Allen, “Nobel Prize-Winning Economists Take Disagreement to Whole New Level,” The Guardian, December 12, 2013, www.theguardian.com/business/2013/dec/10/nobel-prize-economists-robert-shiller-eugene-fama .
11. David Harding, “Efficient Market Theory: When Will It Die,” Winton Capital Management (February 2016).
12. Van K. Tharp, Trade Your Way to Financial Freedom (New York: McGraw-Hill, 1999).
13. Richard D. Donchian, “Trend-Following Methods in Commodity Price Analysis,” Commodity Year Book (1957), 35.
14. Ari Levine and Lasse Heje Pedersen, “Which Trend Is Your Friend,” Financial Analysts Journal 72, no. 3 (May/June 2016).
15. Miles Kimball, “Robert Shiller: Against the Efficient Markets Theory,” Confessions of a Supply-Side Liberal (blog), April 14, 2014, http://blog
.supplysideliberal.com/post/82659078132/robert-shiller-against-the-efficient-markets .
16. John Plender, “A New Paradox Found in Markets Theory,” Financial Times, December 9, 2012, www.ft.com/content/8e2ae5b2-3e14-11e2-91cb-00144feabdc0 .
17. Eugene F. Fama and Kenneth R. French, “Q&A: Market Timing with Moving Averages,” Fama/French Forum , https://famafrench.dimensional.com/questions-answers/qa-market-timing-with-moving-averages.aspx .
18. Eric Johnson, “Benchmark’s Bill Gurley Says He’s Still Worried about a Bubble,” Recode , September 12, 2016, www.recode.net/2016/9/12/12882780/bill-gurley-benchmark-bubble-venture-capital-startups-uber .
Chapter 1
1. Ludwig von Mises, Human Action: A Treatise on Economics (4th rev. ed.) (Irvington-on-Hudson, NY: The Foundation for Economic Education, 1996).
2. Robert Koppel, The Intuitive Trader (Hoboken, NJ: John Wiley & Sons, Inc., 1996), 88.
3. von Mises, Human Action .
4. George Francis Train, Young America on Wall Street (London: Sampson Low, 1857), 209.
5. Arthur Crump, The Theory of Stock Exchange Theory (New York: S. A. Nelson, 1903), 50.
6. Albert Williams, How to Win and How to Lose (Chicago: 1883).
8. The Art of Investing (New York: Appleton, 1888).
9. John Hill Jr., Gold Bricks of Speculation (Chicago: Lincoln Book Concern, 1904).
10. Louis Guenther, Investments and Speculation (Chicago: La Salle Extension University, 1910), 121.
11. G. C. Selden, Psychology of the Stock Market (New York: Ticker Publishing Company, 1912), 12.
12. Wall Street: Money Never Sleeps, directed by Oliver Stone (Los Angeles: 20th Century Fox, 2010).
13. Jack Schwager, Market Wizards: Interviews with Top Traders (New York: HarperCollins, 1993).
14. von Mises, Human Action .
15. Keith Campbell, “Barclay Managed Futures Report,” Barclay Managed Futures Report 3, no. 3 (third quarter 1992), 3.
16. Allison Colter, “Dow Jones” (July 13, 2001).
17. “Trading System Review” (Futures Industry Association Conference, November 2, 1994).
18. Jack Schwager, Getting Started in Technical Analysis (Hoboken, NJ: John Wiley & Sons, Inc., 1999).
19. “The History of the Motley Fool,” Fool.com , November 4, 2003.
20. “The State of the Industry,” Managed Account Reports, Inc . (June 2000).
21. John Allen Paulos, A Mathematician Plays the Stock Market (New York: Basic Books, 2003), 47.
22. “Quantitative Strategy: Does Technical Analysis Work?” Equity Research, Credit Suisse First Boston (September 25, 2002).
23. Bob Bryan, “RED ALERT—Get Ready for a ‘Severe Fall’ in the Stock Market, HSBC says,” Business Insider , October 12, 2016, www.businessinsider.com/hsbc-red-alert-get-ready-for-a-severe-fall-in-the-stock-market-2016-10 .
24. Martin Estlander, “Presentation for the Association of Provident Fund of Thailand & Partners” (Association of Provident Fund of Thailand & Partners, Bangkok, February 26, 2015).
25. Mebane Faber, “A Quantitative Approach to Tactical Asset Allocation,” The Journal of Wealth Management (Spring 2007).
26. Daniel P. Collins, “Kevin Bruce: Improving on a Passion,” Futures
(October 2003).
27. “Disclosure Document,” John W. Henry & Company, Inc. (August 22, 2003).
29. Carla Cavaletti, “Top Traders Ride 1996 Trends,” Futures (March 1997), 68.
30. Jack Schwager, Getting Started in Technical Analysis (Hoboken, NJ: John Wiley & Sons, Inc., 1999).
31. Ewan Kirk, “Ewan Kirk of Cantab on Trend Following,” Trend Following (blog), August 15, 2016, www.trendfollowing.com/2016/08/15/ewan-kirk-cantab-trend-following/ .
32. Mathew Bradbard, “Q&A with Todd Hurlbut and Ted Parkhill for Incline Investment Management,” RCM Futures—Manager’s Corner , www.rcmfutures
.com/managed-futures/incline-investment .
33. Morningstar, “Interview: Cliff Asness Explains Why He Started a Managed Futures Fund,” Business Insider , March 5, 2010, www.businessinsider
.com/cliff-asness-new-fund-is-for-wimps-who-cant-handle-the-market-swings-2010-3 .
34. Jack Schwager, Hedge Fund Market Wizards (Hoboken, NJ: John Wiley & Sons, Inc., 2012).
35. Ginger Szala, “Abraham Trading: Trend Following Earns Texas Sized Profits,” Futures (March 1995), 61.
36. Desmond MacRae, “Valuing Trend-Followers’ Returns,” Managed Account Reports, No. 242 (April 1999), 12.
37. John W. Henry (presentation given to financial consultants, November 17, 2000).
38. John W. Henry (presentation, Geneva, Switzerland, September 15, 1998).
39. Charles Faulkner, Futures 22, no. 12 (November 1993), 98.
40. Patrick Welton, “Has Trend Following Changed,” AIMA Newsletter (June 2001).
41. Morton S. Baratz, The Investor’s Guide to Futures Money Management (Columbia, MD: Futures Publishing Group, 1984).
42. Guest Article, Managed Account Reports 249 (November 1999), 9.
43. John W. Henry (presentation given to financial consultants, November 17, 2000).
44. Brian Hurst, Yao Hua Ooi, and Lasse H. Pedersen, “A Century of Evidence on Trend-Following Investing,” AQR Capital Management (Fall 2014).
45. Peter Borish, “Upstairs/Downstairs Seminar with Tom Baldwin,” Futures Industry Association (1994).
46. “Performance Review,” John W. Henry & Company (February 1999).
47. William Eckhardt, “Tass Twenty Traders Talk,” (presentation, Montreal Ritz Carlton Hotel, Montreal, Canada, June 29, 1996).
48. Schwager, Market Wizards .
49. Riva Atlas, “Macro, Macro Man,” Institutional Investor Magazine (1996).
50. Robert Murray, “Trend Following: Performance, Risk and Correlation Characteristics” (white paper), Graham Capital Management.
52. Christopher Cruden, “Trends in Currency Markets: Which Way the $?” AIMA Newsletter (June 2002).
53. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
54. Mary Greenebaum, “Funds: The New Way to Play Commodities,” Fortune (November 19, 1979).
55. Carol Dweck, “What Is Mindset,” Mindset, accessed December 17, 2016, http://mindsetonline.com/whatisit/about/ .
56. Brett N. Steenbarger, The Psychology of Trading (Hoboken, NJ: John Wiley & Sons, Inc., 2002), 316–17.
57. Brenda Ueland, How to Write, 10th ed. (New York: Graywolf Press, 1997).
58. Bruce Cleland, “Campbell and Company,” Futures (March 2004): 72.
59. David Whitford, “Why Owning the Boston Red Sox Is Like Running a Successful Hedge Fund,” Fortune Small Business (October 25, 2003).
60. “The Whizkid of Futures Trading,” Businessweek , December 6, 1982, 102.
61. Van Tharp, Super Trader: Make Consistent Profits in Good and Bad Markets (New York: McGraw-Hill Education, 2010).
Chapter 2
1. Jim Rogers, Investment Biker (New York: Random House, 1994).
2. Thomas Friedman, The Lexus and the Olive Tree (New York: Farrar, Straus and Giroux, 1999).
6. David Harding, The Winton Papers , Winton Capital Management, www
.wintoncapital.com .
7. Daniel P. Collins, “Seeding Tomorrow’s Top Traders; Managed Money; Dunn Capital Management Provides Help to Commodity Trading Advisor Start-ups,” Futures 32, no. 6 (May 1, 2003): 67.
8. J. R. Newman (ed.), The World of Mathematics (New York: Simon & Schuster, 1956).
9. Jim Collins, Good to Great (New York: Harper Business, 2001).
10. Robert Koppel, The Intuitive Trader (Hoboken, NJ: John Wiley & Sons, Inc., 1996), 74.
11. The Reason Foundation,www.reason.org .
12. Collins, “Seeding Tomorrow’s Top Traders.”
13. Bill Dunn, “Tricycle Asset Management,” (presentation, Market Wizards Tour, May 15, 2003, Saskatoon, Saskatchewan).
16. Amy Rosenbaum, “1990s Highs and Lows: Invasions, Persuasions and Volatility,” Futures 19, no. 14 (December 1990): 54.
17. Andrew Osterland, “For Commodity Funds, It Was as Good as It Gets,” Businessweek , September 14, 1998.
18. Jack Reerink, “Dunn: Slow Reversal Pays Off,” Futures 25, no. 3 (March 1996).
19. Mike Mosser, “Learning from Legends,” Futures 29, no. 2 (February 2000).
20. “How Managed Money Became a Major Area of the Industry; Futures Market,” Futures 21, no. 9 (July 1992): 52.
21. No Country for Old Men , directed by Ethan Coen and Joel Coen (Santa Monica, CA: Miramax Films, 2007).
22. Denise G. Shekerjian, “Uncommon Genius” (New York: Penguin, 1990).
23. Mary Ann Burns, “Industry Icons Assess the Managed Futures Business,” Futures Industry Association (May/June 2003).
24. Reerink, “Dunn: Slow Reversal Pays Off.”
25. Carla Cavaletti, “Comeback Kids: Managing Drawdowns According to Commodity Trading Advisors,” Futures 27, no. 1 (January 1998): 68.
26. “Dunn Capital Management Monthly Commentary,” Dunn Capital Management (February 2003).
27. Keith Campbell, “Barclay Managed Futures Report,” Barclay Managed Futures Report 3, no. 3 (third quarter 1992): 2.
28. “Job Wanted” (advertisement), Dunn Capital Management, www.monster
.com .
29. Ginger Szala, “John W. Henry: Long-Term Perspective,” Futures (1987).
30. John W. Henry (presentation, Geneva, Switzerland, September 15, 1998).
31. Lois Peltz, The New Investment Superstars (New York: John Wiley & Sons, Inc., 2001).
32. Mary Ann Burns, “Industry Icons Assess the Managed Futures Business,” Futures Industry Association (May/June 2003).
33. Mark S. Rzepczynski, “John W. Henry & Co. Year in Review,” (December 2000).
34. Oliver Conway, cover story about John W. Henry & Company, Inc., Managed Derivatives (May 1996).
35. W. H. Auden and L. Kronenberger, eds., The Viking Book of Aphorisms (New York: Viking, 1966).
36. Michael Peltz, “John W. Henry’s Bid to Manage the Future,” Institutional Investor (August 1996).
37. Szala, “John W. Henry.”
38. Peltz, The New Investment Superstars .
39. John W. Henry (presentation, November 17, 2000).
40. Peltz, The New Investment Superstars .
41. “2002 Year in Review,” John W. Henry & Company, Inc. (2002).
42. “Futures Industry Association Conference Seminar,” Trading System Review (November 2, 1994).
43. John W. Henry (presentation, Morgan Stanley Dean Witter Achieve Conference, Naples, Florida, November 17, 2000).
44. Azeez Mustapha, “Leda Braga: A High Earning Hedge Fund Manager,” ADVFN Financial News , May 8, 2014, http://uk.advfn.com/newspaper/azeez-mustapha/26204/leda-braga-a-high-earning-hedge-fund-manager .
45. John W. Henry (presentation, Geneva, Switzerland, September 15, 1998).
48. FIA Research Division dinner, New York, April 20, 1995.
49. “The Alternative Files, History of Managed Futures,” Attain Capital Management (January 2014).
50. Jack Schwager, Market Wizards: Interviews with Top Traders (New York: Harper Business, 1989), 172.
51. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
53. Daniel P. Collins, “Long-Term Technical Trend-Following Method for Managed Futures Programs,” Futures 30, n. 14 (November 2001): 22.
54. Ed Seykota, “The Trading Tribe,” www.seyokota.com/tribe/ .
55. Thom Hartle, ed., “Ed Seykota of Technical Tools,” Technical Analysis of Stocks & Commodities 10, no. 8 (August 1992): 328–31. (Used with permission; www.traders.com .)
59. Shawn Tully, “Princeton’s Rich Commodity Scholars,” Fortune , February 9, 1981, 94.
60. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
61. “System Dynamics,” last modified June 23, 1997, http://web.mit.edu/sysdyn/sd-intro/ .
62. J. L. Kelly Jr., “A New Interpretation of Information Rate,” Bell System Technical Journal (July 1956): 917–26.
63. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
64. Jack Reerink, “The Power of Leverage,” Futures 24, no. 4 (April 1995): 59.
65. Gibbons Burke, “How to Tell a Market by Its Covers: Financial Market Predictions Based on Magazine Covers,” Futures 22, no. 4 (April 1993): 30.
66. Your Trading Edge , www.yte.com.au .
67. Joe Niedzielski, “Wild Market Swings Take Toll on Commodity Trading Advisers,” Dow Jones Newswires , April 25, 2000.
68. I. Gordon and S. Sorkin, eds., The Armchair Science Reader (New York: Simon & Schuster, 1959).
69. Darrell R. Jobman, “How Managed Money Became a Major Area of the Industry,” Futures 21, no. 9 (July 1992): 52.
70. “Campbell & Company (presentation, excerpt),” Futures Industry Association Conference .
71. Mary Ann Burns, “Industry Icons Assess the Managed Futures Business,” Futures Industry Association (May/June 2003).
72. “Value of Adding Managed Futures” (marketing documents), Campbell & Company.
73. “2003 Disclosure Document,” Campbell & Company.
74. Desmond McRae, “31-Year Track Record of 18.1%,” Managed Futures (March 2003).
75. “Barclay Managed Futures Report,” Barclay Trading Group, Ltd. 2, no. 3 (third quarter 1991): 2.
76. The Futures and Industry Association’s Future and Options Expo ’98, Sheraton Chicago Towers & Hotel, Chicago, October 14–16, 1998.
81. Chuck Epstein, “The World According to J. Parker,” Managed Account Reports (November 1998).
82. “Barclay Managed Futures Report,” Barclay Trading Group, Ltd. 2, no. 3 (third quarter 1991): 7.
84. Simon Romero, “A Homespun Hedge Fund, Tucked Away in Texas,” New York Times , December 28, 2003, 1.
85. Futures (March 1995).
86. Romero, “A Homespun Hedge Fund.”
87. “Program Description: Trading Methods and Strategies,” Abraham Trading Company, www.abrahamtrading.com .
88. Ayn Rand, The Fountainhead (New York: Bobbs-Merrill, 1943).
89. Romero, “A Homespun Hedge Fund.”
90. Jack Schwager, Market Wizards: Interviews with Top Traders (New York: New York Institute of Finance, 1989).
91. Stanley W. Angrist, “Commodities: Winning Commodity Traders May Be Made, Not Born,” Wall Street Journal , September 5, 1989.
92. Greg Burns, “Rich Dennis: A Gunslinger No More,” Businessweek , April 7, 1997.
93. Susan Abbott, “Richard Dennis: Turning a Summer Job into a Legend,” Futures , September 1983, 58.
97. Paul Rabar, “Managed Money: Capitalizing on the Trends of 1990,” Futures 20, no. 3 (March 1991).
98. Schwager, Market Wizards .
99. Barbara Dixon, “Richard Donchian: Managed Futures Innovator and Mentor,” Futures Industry Association .
100. William Baldwin, “Rugs to Riches (Section: The Money Men),” Forbes (March 1, 1982).
101. Dixon, “Richard Donchian.”
104. Baldwin, “Rugs to Riches.”
105. Dixon, “Richard Donchian.”
106. Baldwin, “Rugs to Riches.”
107. “Futures Industry Association Review: Interview: Money Managers,” Futures Industry Association , www.fiafii.org .
108. Barbara S. Dixon, “Discretionary Accounts,” Managed Account Reports , Report No. 20, no. 14: 5.
109. Barbara S. Dixon, “Discretionary Accounts,” Managed Account Reports , Report No. 20, no. 14: 5.
110. Edwin Lefèvre, “Reminiscences of a Stock Operator,” (New York: George H. Doran Company, 1923).
111. Andrew Leckey, “Dabble, Don’t Dive, in Futures,” Chicago Tribune (October 2, 1986, C1).
112. Dickson G. Watts, Speculation as a Fine Art (reprint, Flint Hill, Virginia: Fraser Publishing Co., 1997).
113. Eric Johnson, “Benchmark’s Bill Gurley says he’s still worried about a bubble,” Recode (September 12, 2016), www.recode.net/2016/9/12/12882780/bill-gurley-benchmark-bubble-venture-capital-startups-uber .
Chapter 3
1. Sir Arthur Conan Doyle, The Adventures of Sherlock Holmes (New York:
A. L. Burt, 1892).
2. Alexander M. Ineichen, Absolute Returns (New York: John Wiley & Sons, Inc., 2003): 19.
3. “Disclosure Document,” John W. Henry & Company, Inc. (August 22, 2003).
4. “BMFR,” Barclay Trading Group (first quarter 2003).
5. “International Traders Research Star Ranking System Explanation,” International Traders Research , http://managedfutures.com .
6. Ludwig von Mises, Human Action: A Treatise on Economics, 4th rev. ed. (Irvington-on-Hudson, NY: The Foundation for Economic Education, 1996).
7. Larry Harris, Trading and Exchanges: Market Microstructure for Practitioners (New York: Oxford University Press, 2003).
8. David Greising, “How Managed Funds Managed to Do So Poorly,” Businessweek , November 23, 1992, 112.
9. Daniel P. Collins, “The Return of Long-Term Trend Following,” Futures 32, no. 4 (March 2003): 68–73.
10. Desmond McRae, “Top Traders,” Managed Derivatives (May 1996).
11. “Trend Following: Performance, Risk and Correlation Characteristics” (white paper), Graham Capital Management.
12. Larry Harris, Trading and Exchanges: Market Microstructure for Practitioners (New York: Oxford University Press, 2003).
13. “Schroder GAIA BlueTrend,” Schroders Expert , Issue 1 (February 2016).
14. Ben Warwick, “The Holy Grail of Managed Futures,” Managed Account Reports , no. 267 (May 2001): 1.
15. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
16. “Drawdowns,” Institutional Advisory Services Group, www.iasg.com .
17. Laurie Kaplan, “Turning Turtles into Traders,” Managed Derivatives (May 1996).
18. “Marketing Materials,” Dunn Capital Management, Inc.
19. Carla Cavaletti, “Comeback Kids: Managing Drawdowns According to Commodity Trading Advisors,” Futures 27, no. 1 (January 1998): 68.
20. Michael Peltz, “John W. Henry’s Bid to Manage the Future,” Institutional Investor (August 1996).
21. D. Harding, G. Nakou, and A. Nejjar, “The Pros and Cons of Drawdown as a Statistical Measure of Risk for Investments,” AIMA Journal (April 2003): 16–17.
22. Cavaletti, “Comeback Kids.”
24. Thomas F. Basso, “When to Allocate to a CTA?—Buy Them on Sale” (1997).
26. “New Fans for Managed Futures,” Euromoney Institutional Investor PLC (February 1, 2003): 45.
27. Julius A. Staniewicz, “Learning to Love Non-Correlation. Investor Support,” John W. Henry & Company.
28. Ginger Szala, “Tom Shanks: Former ‘Turtle’ Winning Race the Hard Way,” Futures 20, no. 2 (January 15, 1991): 78.
29. Carla Cavaletti, “Turtles on the Move,” Futures 27 (June 1998): 79.
30. Laurie Kaplan, “Turning Turtles into Traders,” Managed Derivatives (May 1996).
31. Harris, Trading and Exchanges.
32. Larry Harris, “The Winners and Losers of the Zero-Sum Game: The Origins of Trading Profits, Price Efficiency and Market Liquidity (Draft 0.911)” (Los Angeles: University of Southern California, May 7, 1993).
34. Danny Hakim, “Huge Losses Move Soros to Revamp Empire,” New York Times , May 1, 2000.
35. Enoch Cheng, “Of Markets and Morality . . .” Café Bagola (blog), August 27, 2002, https://web.archive.org/web/20041019121710/ .
36. Ayn Rand, “Philosophical Detection,” Philosophy: Who Needs It? (Indianapolis, IN: Bobbs-Merrill, 1998).
37. Lawrence Parks (presentation, Hearing on Hedge Funds before the Subcommittee on Capital Markets, Securities, and GSEs; House Committee on Banking and Financial Services, United States House of Representatives, March 3, 1999).
38. Hakim, “Huge Losses.”
40. “Merrill Lynch & Co. Inc. Research Reports Securities Litigation, 02 MDL 1484” (Ruling by Federal Judge Milton Pollack dismissing class-action claims brought against Merrill Lynch & Co. and its former analyst Henry Blodgett).
41. Gregory J. Millman, “The Chief Executive,” (January–February 2003).
42. Bill Dries, Futures (August 1995): 78.
43. Mark Rzepczynski, “The Weatherstone Approach to Hedge Fund Investing,” Disciplined Systematic Global Macro Views (blog), October 13, 2016, http://mrzepczynski.blogspot.com/2016/10/the-weatherstone-approach-to-hedge-fund.html .
Chapter 4
1. Nassim Taleb, Fooled by Randomness (New York: Texere, 2001).
2. Herb Greeenberg, “Answering the Question—Who Wins from Derivatives Losers,” San Francisco Chronicle , March 20, 1995, D1.
4. Alexander M. Ineichen, Absolute Returns (New York: John Wiley & Sons, Inc., 2003): 416.
5. Michael J. Mauboussin and Kristen Bartholdson, “Integrating the Outliers: Two Lessons from the St. Petersburg Paradox,” The Consilient Observer 2, no. 2 (January 28, 2003).
6. Jason Russell, www.acorn.ca .
7. “Trend Following: Performance, Risk, and Correlation Characteristics” (white paper), Graham Capital Management (April 2013).
8. William Poundstone, Fortune’s Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street (New York: Farrar, Straus & Giroux): 213.
9. Thomas S. Y. Ho and Sang Bin Lee, The Oxford Guide to Financial Modeling (Oxford, UK: Oxford University Press, 2004): 559.
10. Ginger Szala, “Barings Abyss,” Futures 24, no. 5 (May 1995): 68.
11. Carolyn Cui and Ann Davis, “Some Trend-Following Funds Are Winners in Rough Market,” Wall Street Journal , November 5, 2008.
12. Corporate brochure, John W. Henry & Company, Inc. (1998), www.jwh.com .
13. Mark S. Rzepczynski, “President, John W. Henry and Co.” (presentation), www.jwh.com .
14. Erin E. Arvedlund, “Swinging for the Fences: John W. Henry’s Managed Futures Funds Are Striking Out,” Barron’s , December 4, 2000.
15. Presentation, John W. Henry and Co., November 17, 2000, www.jwh.com .
16. Erin E. Arvedlund, “Whiplash! Commodity-Trading Advisers Post Sharp Gains,” Barron’s , January 15, 2001.
17. “Fast Finish Makes 2000 a Winner,” Managed Account Reports , no. 263 (January 2001).
18. Presentation, John W. Henry and Co., November 17, 2000, www.jwh.com .
19. Pallavi Gogoi, “Placing Bets in a Volatile World,” Businessweek , September 30, 2002.
20. “Enron Employee Feedback,” TurtleTrader .
21. “Barclay Managed Futures Report,” Barclay Trading Group (fourth quarter 2002).
22. Larry Swedroe, “Buckingham Asset Management,” www.bamstl.com/ .
23. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
24. Paul Barr, “Trending Markets Lead to Profit: September 11 Example Will Go in Case Studies,” Money Management World (September 25, 2001).
25. Trillion Dollar Bet , transcript, Nova , no. 2075 (February 8, 2000).
27. Kevin Dowd, “Too Big to Fail? Long-Term Capital Management and the Federal Reserve,” Cato Institute Briefing Paper, no. 52 (September 23, 1999).
28. Lowenstein, When Genius Failed , 34.
31. Clay Harris and Wiliam Hall, “Top-Tier Departures Expected at UBS,” Financial Times: London Edition (October 2, 1998): 26.
32. “The LTCM Crisis and Its Consequences for Banks and Banking Supervision,” Organization for Economic Cooperation and Development (June 1999).
33. Jerry Parker (The Futures and Industry Association’s Future and Options Expo ’98, Sheraton Chicago Towers & Hotel, Chicago, Ill., October 14–16, 1998).
34. John W. Henry (presentation, Geneva, Switzerland, September 15, 1998).
36. “Black-Scholes Model,” Wikipedia , last modified December 14, 2016, https://en.wikipedia.org/wiki/Black--Scholes_model .
37. Lowenstein, When Genius Failed , 71.
38. Andrew Osterland, “For Commodity Funds, It Was as Good as It Gets,” Businessweek , September 14, 1998.
39. John W. Meriwether, “Letter to Investors,” (September 1998).
41. Bruce Cleland, “Campbell and Company, The State of the Industry,” Managed Account Reports, Inc. (June 2000).
42. Robert Lenzner, “Archimedes on Wall Street,” Forbes (October 19, 1998).
43. Kevin Dowd, “Too Big to Fail? Long-Term Capital Management and the Federal Reserve,” Cato Institute Briefing Paper, no. 52 (September 23, 1999).
44. Malcolm Gladwell, “Blowing Up,” The New Yorker , April 22 and 29, 2002.
45. G. K. Chesterton, The Scandal of Father Brown (London: Cassell and Company, 1935).
46. W. B. Arthur, S. N. Durlaf, and D. A. Lane, eds., The Economy as an Evolving Complex System II , (Reading, MA: Addison-Wesley, 1997), 566.
47. James Rickards, The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis (London: Penguin, 2016).
48. Dan Colarusso, “Gray Monday’s First Casualty: Famed Soros Confidant Victor Niederhoffer,” The Street (October 29, 1997), www.thestreet.com .
49. Mark Etzkorn, “Bill Dunn and Pierre Tullier: The Long Run (Trader Profile),” Futures 26, no. 2 (February 1997).
50. David Henry, USA Today , October 30, 1997.
51. Victor Niederhoffer, Letter to shareholders.
52. “Niederhoffer 1997 Performance,” Barclay Managed Futures Report .
53. Etzkorn, “Bill Dunn and Pierre Tullier.”
54. The Stark Report (second quarter 1997).
55. Greg Burns, “Whatever Voodoo He Uses, It Works: Trader Victor Niederhoffer Is as Eccentric as He Is Contrarian,” Businessweek , February 10, 1997.
57. George Soros, Soros on Soros (New York: John Wiley & Sons, Inc., 1995).
58. Victor Niederhoffer and Laurel Kenner, “Why the Trend Is Not Your Friend,” The Speculator: MSN Money , May 2, 2002, www.moneycentral.msn.com .
59. Victor Niederhoffer and Laurel Kenner, Practical Speculation (Hoboken, NJ: John Wiley & Sons, Inc., 2003): 74.
61. Victor Niederhoffer, The Education of a Speculator (New York: John Wiley & Sons, Inc., 1997).
62. Greg Burns, “Whatever Voodoo He Uses, It Works: Trader Victor Niederhoffer Is as Eccentric as He Is Contrarian,” Businessweek , February 10, 1997.
63. Gladwell, “Blowing Up.”
64. IFCI International Financial Risk Institute.
65. Mark Hawley, “Dean Witter Managed Futures,” (presentation, Futures Industry Association Dinner, New York City, April 20, 1995).
66. James Simons, The Greenwich Roundtable (June 17, 1999).
67. John W. Henry (presentation, Geneva, Switzerland, September 15, 1998).
68. Sharon Reier, “Easy to Beat Up, Hard to Kill,” The International Herald Tribune (March 23, 2002), www.iht.com .
69. Ed Krapels, “Re-examining the Metallgesellschaft Affair and Its Implication for Oil Traders,” Oil & Gas Journal , March 26, 2001.
71. John Digenan et al., “Metallgesellschaft AG: A Case Study,” The Journal of Research and Ideas on Financial Markets and Trading .
72. Lewis Carroll, Through the Looking Glass , 1872.
73. “The Value of a JWH Investment as a Portfolio Diversifier” (marketing materials), John W. Henry and Company (September 1998).
74. Arthur Conan Doyle, The Sign of Four (London and New York: Pitman and Sons, 1890).
75. “Computers Challenge the Stockmarket Gurus,” The Economist , March 1987.
76. Christopher L. Culp, Media Nomics , April 1995, 4.
77. “The Coming Storm,” The Economist , February 17, 2004, www.economist
.com/node/2440313 .
78. Emanuel Derman, The Journal of Derivatives (Winter, 2000): 64.
79. Frederic Townsend, Futures (December 2000): 75.
80. Rickards, The Road to Ruin .
81. “Another Two Bites the Dust,” Derivative Strategies (May 16, 1994): 7.
82. Luke Kawa and Andrea Wong, “Broken Indicators Mean It’s Growing Harder to Spot Troubles in the Market,” Bloomberg (October 19, 2016), www.bloomberg.com/news/articles/2016-10-19/wall-street-sees-graveyard-of-broken-indicators-in-reform-s-wake .
Chapter 5
1. Michael J. Mauboussin and Kristen Bartholdson, “The Babe Ruth Effect: Frequency versus Magnitude,” The Consilient Observer 1, no. 2 (January 29, 2002).
2. Michael Lewis, Moneyball: The Art of Winning an Unfair Game (New York: W.W. Norton, 2003).
3. Sam Caldarone, “Emotions Can Lie, Numbers Don’t,” The Varsity , October 17, 2016, http://thevarsity.ca/2016/10/17/emotions-can-lie-numbers-dont/ .
7. Earnshaw Cook, Percentage Baseball (Baltimore: Waverly Press, 1964).
8. Rob Neyer, “A New Kind of Baseball Owner,” ESPN.com , August 15, 2002.
9. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
10. Richard Driehaus, “Unconventional Wisdom in the Investment Process” (presentation, 1994).
11. John Dorschner, “Boca Raton, Fla.-Based Firm Is a Standout in Futures,” Miami Herald , January 27, 2001.
12. Greg Burns, “Former ‘Turtle’ Turns Caution into an Asset,” Chicago Sun-Times , May 29, 1989, 33.
13. Rob Neyer, “Examining the Art of Evaluating: Q&A with Michael Lewis,” ESPN.com , May 13, 2003.
15. Steinberg, “Changing the Game.”
16. James Surowiecki, “The Buffett of Baseball,” The New Yorker , September 23, 2002.
17. Rob Neyer, “Red Sox Hire James in Advisory Capacity,” ESPN.com , November 7, 2002.
18. Bill James, “Red Sox Hire. Baseball Abstract,” USA Today , November 15, 2002.
19. Surowiecki, “The Buffett of Baseball.”
21. Caldarone, “Emotions Can Lie.”
22. Bill James, 1981 Baseball Abstract (Bill James, 1981).
25. Ben McGrath, “The Professor of Baseball,” The New Yorker , July 14, 2003, 38.
26. New York Times , September 26, 2002.
27. Neyer, “Red Sox Hire James.”
28. Jon Birger, “Baseball by the Numbers,” Money , April 2003, 110.
30. Thomas Boswell, “Evaluation by Numbers Is Beginning to Add Up,” Washington Post , May 29, 2003, D1.
31. Jon Birger, “Baseball by the Numbers,” Money , April 2003, 110.
32. Neyer, “Red Sox Hire James.”
33. Eric Perlmutter, “Little Not Big Enough for Sox,” The Brown Daily Herald , October 29, 2003.
34. Michael Lewis, “Out of Their Tree,” Sports Illustrated , March 1, 2004, 7.
35. Stephen Jay Gould, Triumph and Tragedy in Mudville: A Lifelong Passion for Baseball (New York: W.W. Norton, 2003): 176–7.
37. Jeff Merron, “The Worst Sports Moves of 2003,” ESPN.com .
38. Sam Miller, “Are Statheads Responsible for the Most Exciting Postseason in Years?” ESPN.com (October 24, 2016), www.espn.com/mlb/story/_/id/17870355/are-statheads-responsible-most-exciting-postseason-years .
39. Steinberg, “Changing the Game.”
40. Ben Cohen, “The Golden State Warriors Have Revolutionized Basketball,” Wall Street Journal (April 6, 2016), www.wsj.com/articles/the-golden-state-warriors-have-revolutionized-basketball-1459956975 .
42. Rob Arthur, “How Baseball’s New Data Is Changing Sabermetrics,” FiveThirtyEight (March 17, 2016), http://fivethirtyeight.com/features/how-baseballs-new-data-is-changing-sabermetrics/ .
44. Bill Belichick, New England Patriots Press Conference, October 2016.
45. Caldarone, “Emotions Can Lie.”
46. Howard W. Eves, Mathematical Circles Squared (Boston: Prindle, Weber and Schmidt, 1972).
Chapter 6
1. Financial Trader 1, no. 7 (September/October 1994): 26.2.
2. Jason Russell, www.acorn.ca .
3. Brian Hurst, Yao Hua Ooi, and Lasse H. Pedersen, “Understanding Managed Futures,” AQR Capital Management (Winter 2010).
4. Gerard Jackson, Brookesnews.com , April 21, 2003.
5. Jason Zweig, “Do You Sabotage Yourself?” Business 2.0 , May 2001.
6. David Dreman, Contrarian Investment Strategies (New York: Simon & Schuster, 1998).
7. Lao Tsu, “Verse XXXIII,” Tao Te Ching .
8. Steven Pearlstein, “The New Thinking about Money Is That Your Irrationality Is Predictable,” Washington Post , January 27, 2002, H1.
9. Daniel Goleman, “What Makes a Leader?” Harvard Business Review (1998).
10. Harris Collingwood, “The Sink or Swim Economy,” New York Times , June 8, 2003.
11. Jack D. Schwager, The New Market Wizards (New York: Harper Business, 1992).
12. Ayn Rand, Atlas Shrugged (New York: Random House, 1957).
13. Animal House , directed by John Landis (Universal City, CA: Universal Pictures, 1978).
14. Daneen Skube, “Self Knowledge Keys,” The Seattle Times (2002).
15. Futures 22, no. 12. (November 1993): 98.
16. Alexis de Tocqueville, Democracy in America (New York: Vintage, 1959).
17. Daniel Goleman, Emotional Intelligence (New York: Bantam, 1995).
18. Goleman, “What Makes a Leader?”
20. Rand, Atlas Shrugged .
21. Denise G. Shekerjian, Uncommon Genius (New York: Penguin Books, 1990).
22. Goleman, “What Makes a Leader?”
23. Tom Girard, “The Wizards Cast a Spell,” Financial Trader , No. 4 (July 1995).
24. Gustave Le Bon, The Crowd: A Study of the Popular Mind (London: T. F. Unwin, 1925).
25. Rand, Atlas Shrugged .
26. Girard, “The Wizards Cast a Spell.”
28. Schwager, The New Market Wizards , 416.
29. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
30. Ludwig von Mises, Human Action (New Haven, CT: Yale University Press, 1963).
31. Jack Schwager, Getting Started in Technical Analysis (New York: John Wiley & Sons, Inc., 1999).
32. Robert Koppel, The Intuitive Trader (New York: John Wiley & Sons, Inc., 1996), 74.
33. David Nusbaum, “Mind Games; Trading Behavior,” Futures 23, no. 6 (June 1994): 60.
34. Michelle Conlin, Businessweek , June 30, 2003.
35. Michael J. Mauboussin and Kristen Bartholdson, “All Systems Go: Emotion and Intuition in Decision-Making,” The Consilient Observer 3, no. 2 (January 27, 2004).
36. Schwager, The New Market Wizards .
37. Michael Crichton, The Lost World (New York: Knopf, 1995).
39. Alan Greenberg, Memos from the Chairman (New York: Workman, 1996).
40. Anna Muoio, “All The Right Moves—If You See a Good Idea, Look for a Better One,” Fast Company , No. 24 (May 1999): 192.
41. Jason Russell, www.acorn.ca .
42. Robert B. Zajonc, “Feeling and Thinking: Preferences Need No Inferences,” American Psychologist (1980): 151–75.
43. Antonio R. Damasio, Descartes’ Error: Emotion, Reason, and the Human Brain (New York: Avon, 1994), xii.
44. David Warsh, “Paul Samuelson’s Secret,” Economic Principals (January 23, 2011), www.economicprincipals.com/issues/2011.01.23/1225.html .
45. Shawn Tully, “Princeton’s Rich Commodity Scholars,” Fortune , February 9, 1981.
46. Sam Carpenter, Work the System: The Simple Mechanics of Making More and Working Less (Austin, TX: Greenleaf, 2011).
Chapter 7
1. Lewis Carroll, Alice’s Adventures in Wonderland (1865).
2. Gerd Gigerenzer and Peter M. Todd, Simple Heuristics That Make Us Smart (New York: Oxford University Press, 1999), 28.
3. Robert Rubin (Harvard Commencement Address before the graduating class of 2001), www.treasury.gov/press-center/press-releases/Pages/rr3152
.aspx .
4. Carla Fried, “The Problem with Your Investment Approach,” Business 2.0 (November 2003): 146.
5. “The Trading Tribe” (forum response), The Trading Tribe, www.seykota
.com/tribe/ .
6. Thomas A. Stewart, “How to Think with Your Gut,” Business 2.0 (November 2002), www.marketfocusing.com/b20_5.html .
8. Gerd Gigerenzer and Peter M. Todd, Simple Heuristics That Make Us Smart (New York: Oxford University Press, 1999): 14.
9. Stephen Hawking, A Brief History of Time (New York: Bantam Books, 1988).
10. Gigerenzer and Todd, Simple Heuristics, 358.
11. Futures 22, no. 12 (November 1993): 98.
12. Gigerenzer and Todd, Simple Heuristics, 361.
13. Gerd Gigerenzer, “Smart Heuristics,” Edge Foundation, Inc. (March 31, 2003), www.edge.org/conversation/gerd_gigerenzer-smart-heuristics .
14. Bruce Bower, “For Sweet Decisions, Mix a Dash of Knowledge with a Cup of Ignorance,” Science News 155, no. 22 (May 29, 1999), www.sciencenews.org .
15. Mark Rzepczynski (presentation, New York Mercantile Exchange).
16. Anna Muoio, “All The Right Moves—If You See a Good Idea, Look for a
Better One,” Fast Company, No. 24 (May 1999): 192.
17. Ari Levine and Lasse Heje Pedersen, Financial Analysts Journal 72, no. 3 (May/June 2016).
18. “Market Commentary,” John W. Henry and Company.
19. Daniel P. Collins, “Building a Stronger Fort,” Futures 21, no. 6 (May 1, 2003): 82.
20. Gigerenzer, “Smart Heuristics.”
21. Larry Swedroe, “Swedroe: A Persistent Kind Of Momentum,” ETF.com (September 16, 2016), www.etf.com/sections/index-investor-corner/
swedroe-persistent-kind-momentum .
22. Clayton M. Christensen, The Innovator’s Dilemma (Boston: Harvard
Business School Press, 1997).
23. Tom Girard, “The Wizards Cast a Spell,” Financial Trader, No. 4 (July 1995).
24. Michael J. Mauboussin and Kristen Bartholdson, “Be the House: Process and Outcome in Investing,” The Consilient Observer 2, no. 19 (October 7, 2003).
25. J. Edward Russo and Paul J. H. Schoemaker, Winning Decisions (New York: Doubleday, 2002).
26. Leigh Buchanan and Andrew O’Connell, “A Brief History of Decision Making,” Harvard Business Review (January 2006), https://hbr.org/2006/01/a-brief-history-of-decision-making .
Chapter 8
1. Thomas Harris, The Silence of the Lambs (New York: St. Martin’s Press, 1988).
2. Webster’s Revised Unabridged Dictionary (Springfield, MA: G. C. Merriam, 1913).
3. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
4. Jessica James and Neil Johnson, “Physics and Finance. Visions: Briefing Papers for Policy Makers,” Institute of Physics and IOP Publishing Ltd . (1999–2000).
5. Richard Feynman, “Feynman on Scientific Method,” (presentation, Cornell University, 1964), www.youtube.com/watch?v=EYPapE-3FRw .
6. Pierre Simon, Marquis de Laplace, Theorie Analytique des Probabilites (Paris, Ve. Courcier, 1812).
9. Darrell Huff, How to Take a Chance (New York: W. W. Norton, 1959).
10. Manus J. Donahue III, “An Introduction to Chaos Theory and Fractal Geometry,” (1997).
11. “Daniel Patrick Moynihan,” Wikipedia , last modified December 12, 2016, https://en.wikipedia.org/wiki/Daniel_Patrick_Moynihan .
12. Gerd Gigerenzer, “Smart Heuristics,” Edge Foundation, Inc . (March 31, 2003), www.edge.org/conversation/gerd_gigerenzer-smart-heuristics .
14. National Institute of Standards and Technology, www.itl.nist.gov .
15. Michael J. Mauboussin and Kristen Bartholdson, “A Tail of Two Worlds, Fat Tails and Investing,” The Consilient Observer 1, no. 7 (April 9, 2002).
16. Ha Lux, “The Secret World of Jim Simons,” Institutional Investor 34, no. 11 (November 1, 2000): 38.
18. Jerry Parker, “The State of the Industry,” Managed Account Reports, Inc . (June 2000).
19. Daniel P. Collins, “Chenier: Systematizing What Works (Trader Profile),” Futures 32, no. 9 (July 1, 2003): 86.
20. Roger Lowenstein, Wall Street Journal , June 13, 2003.
21. Benoit B. Mandelbrot, “A Multifractal Walk down Wall Street,” Scientific American 280, no. 2 (February 1999): 70–73.
22. Larry Swedroe, Buckingham Asset Management, www.bamstl.com/ .
24. Mark Rzepczynski, “Return Distribution Properties of JWH Investment Programs, Stock and Bond Indices, and Hedge Funds,” John W. Henry and Co., No. V (June 2000).
25. National Institute of Standards and Technology, www.itl.nist.gov .
27. Jim Rogers, Investment Biker (New York: Random House, 1994).
28. Larry S. Liebovitch, “Two Lessons from Fractals and Chaos,” Complexity 5, no. 4 (2000): 34–43.
29. Per Bak, “Narrative Physics,” The Paula Gordon Show (February 1, 2000), www.paulagordon.com/shows/bak/ .
30. Donald H. Rumsfeld, “DoD News Briefing—Secretary Rumsfeld and Gen. Myers,” (U.S. Department of Defense, February 12, 2002), http://archive
.defense.gov/Transcripts/Transcript.aspx?TranscriptID=2636 .
31. Bill Bonner, “Understanding the Nature of the Fat Tail Phenomenon,” American Writers and Artists Inc .
Chapter 9
1. “Of Pimps, Punters and Equities,” The Economist , March 24, 2001.
2. “Crossfire,” CNN , December 21, 1999.
3. Richard Rudy, “Buy and Hold: A Different Perspective,” Barclay Managed Futures Research (fourth quarter 2001).
4. James Glassman, “Buy It Now! For a Fine Keepsake of the Internet Boom!” (Review of Dow 36000 , Amazon.com, November 7, 2001).
5. Jerry Parker, “The State of the Industry,” Managed Account Reports, Inc. (June 2000).
7. William R. Gallacher, Winner Take All (New York: McGraw-Hill, 1994).
8. David Dukcevich, Forbes (May 6, 2002).
9. James Cramer, CNBC: Kudlow and Cramer (television interview, Yahoo! Chat , September 7, 2000).
10. “News Release,” Berkshire Hathaway, Inc. (May 22, 2002).
11. Washington Post (March 6, 2003): E1.
12. Courtney Comstock, “Michael Steinhardt Bashes Warren Buffett: ‘He’s Just The Greatest PR Person Of All Time . . . How He Treated John Gutfreund Was Disgusting,’” Business Insider (April 5, 2011), www.businessinsider
.com/michael-steinhardt-bashes-warren-buffett-greatest-pr-person-of-all-time-conned-everybody-2011-4 .
13. James K. Glassman, Washington Post , December 9, 2001.
14. “Moneyline,” CNN , December 23, 1999.
15. James K. Glassman, Washington Post , February, 17, 2002.
16. “Street Sweep,” CNN (April 4, 2000).
17. Jennifer Karchmer, “Tiger Management Closes: Julian Robertson Plans to Return Money to Shareholders after Losses in Value Stocks,” CNNfn (March 30, 2000: 6:59 p.m. EST).
18. Aaron L. Task, “Requiem for a Heavyweight,” TheStreet.com .
19. “Larry King Live,” CNN , March 2001.
20. Edward Clendaniel, “After the Sizzle Comes the Fizzle,” Forbes.com , March 25, 2002.
21. Allan Sloan, “Even with No Bull Market, Baby Boomers Can Thrive,” Washington Post , March 26, 2002, E1.
22. Alan Abelson, “Up and Down Wall Street,” Barron’s , December 15, 2003.
23. B. Luke, “WorldCom: The Accounting Scandal; JR Kuhn Jr.,” The Charlotte Observer (2006).
24. David Rode and Satu Parikh, “An Evolutionary Approach to Technical Trading and Capital Market Efficiency,” The Wharton School, University of Pennsylvania (May 1, 1995).
25. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
26. “Harding: Master of the Markets,” (video clip, CNBC , April 8, 2011), http://video.cnbc.com/gallery/?video=3000015574 .
36. “Defining Critical Thinking,” The Critical Thinking Community , www
.criticalthinking.org/aboutCT/define_critical_thinking.cfm .
37. “General Form for Registration of Securities: Pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934,” United States Securities and Exchange Commission, www.sec.gov/Archives/edgar/data/1309136/000090514804005334/efc4-2070_form1012g.txt .
38. “What Happened? What’s Next? Merrill Lynch Review and Forecast (marketing flyer),” Merrill Lynch.
39. Jerry Garcia and Robert Hunter, “Casey Jones” (The Grateful Dead, Workingman’s Dead , 1970).
40. David Whitford, “Why Owning the Boston Red Sox Is Like Running a Successful Hedge Fund,” Fortune Small Business (October 25, 2003).
41. Dave Barry (February 3, 2002).
42. Jean-Philippe Bouchaud and Damien Challet, “Why Have Asset Price Properties Changed So Little in 200 Years” (May 2, 2016).
Chapter 10
1. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
2. “Marketing Materials,” Dunn Capital Management, Inc.
3. Leon G. Cooperman, “CNBC Interview with Ron Insana.”
4. Charles Sanford, “Commencement address,” (University of Georgia, June 17, 1989).
5. Gibbons Burke, “Managing Your Money,” Active Trader (July 2000).
6. Mark Rzepczynski, “Portfolio Diversification: Investors Just Don’t Seem to Have Enough,” JWH Journal .
7. Jack Reerink, “The Power of Leverage,” Futures 24, no. 4 (April 1995).
8. Edward O. Thorp, The Mathematics of Gambling (Hollywood, CA: Gambling Times, 1984).
9. Larry Harris, Trading and Exchanges: Market Microstructure for Practitioners (New York: Oxford University Press, 2003).
10. “Going Once, Going Twice,” Discover , August 2002, 23.
11. Jim Little and Sol Waksman, “A Perspective on Risk,” Barclay Managed Futures Report .
12. Craig Pauley, “How to Become a CTA,” (June 1994).
13. Thomas L. Friedman, The Lexus and The Olive Tree (New York: Farrar, Straus & Giroux, 1999).
14. Gibbons Burke, “Managing Your Money,” Active Trader (July 2000).
15. Craig Pauley, “How to Become a CTA” (June 1994).
16. Ed Seykota and Dave Druz, “Determining Optimal Risk,” Technical Analysis of Stocks and Commodities Magazine 11, no. 3 (March 1993):
122–124, www.traders.com .
17. Gibbons Burke, “Gain Without Pain: Money Management in Action,” Futures 21, no. 14 (December 1992): 36.
18. Tom Basso, “How to Become a CTA” (June 1994).
19. Carla Cavaletti, “Comeback Kids: Managing Drawdowns According to Commodity Trading Advisors,” Futures 27, no. 1 (January 1998): 68.
20. Michael Peltz, “John W. Henry’s Bid to Manage the Future,” Institutional Investor (August 1996).
21. InterMarket, The Worldwide Futures and Options Report (Chicago: InterMarket Publishing Group, July 1984).
22. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
23. Oliver Conway, “Cover story about John W. Henry & Company, Inc.,” Managed Derivatives (May 1996).
24. Ted Williams, The Science of Hitting (New York: Simon & Schuster, 1986), 7.
25. Desmond McRae, “31-Year Track Record of 18.1%: Managed Account Reports: Extracting Inherent Value,” Managed Futures (March 2003).
26. Daniel Colton, “Trading the Pain Threshold (Trader Profile: Mark van Stolk),” Futures (November 2003): 98.
27. Ludwig von Mises, Human Action: A Treatise on Economics, 4th rev. ed. (Irvington-on-Hudson, NY: The Foundation for Economic Education, 1996).
28. Ellyn E. Spragins, “Gary Weiss, and Stuart Weiss, Contrarians,” Businessweek, December 29, 1986, 74.
29. Washington Post (December 9, 2001).
30. Jack D. Schwager, The New Market Wizards (New York: Harper Business, 1992).
31. “Bruce Kovner,” Wikipedia , last modified October 14, 2016, https://en
.wikipedia.org/wiki/Bruce_Kovner .
32. “John W. Henry,” Wikipedia , last modified December 15, 2016, https://en
.wikipedia.org/wiki/John_W._Henry .
35. “David Harding,” Wikipedia , last modified December 11, 2016, https://en
.wikipedia.org/wiki/David_Harding_%28financier%29 .
36. Erin E. Arvedlund, “On the Right Track,” Barron’s (November 30, 2009), www.barrons.com/articles/SB125935481888466969 .
37. Jerry Parker, “The State of the Industry,” Managed Account Reports, Inc. (June 2000).
38. Bruce Terry, Managed Account Reports (September 2001).
39. Morton Baratz, “Do Trend Followers Distort Futures Prices?” Managed Account Reports , No. 43: 9.
40. Sharon Schwartzman, “Computers Keep Funds in Mint Condition: A Major Money Manager Combines the Scientific Approach with Human Ingenuity,” Wall Street Computer Review 8, no. 6 (March 1991): 13.
42. Friedman, The Lexus and the Olive Tree .
43. “Barclay Trading Group, Ltd.,” Barclay Managed Futures Report 4, no. 1 (first quarter 1993): 3.
45. John W. Henry (presentation, Geneva, Switzerland, September 15, 1998).
46. “Trading System Review,” (Futures Industry Association Conference Seminar, November 2, 1994).
47. Tom Basso, “How to Become a CTA,” (June 1994).
48. Leo Melamed, Escape to the Futures (New York: John Wiley & Sons, Inc., 1996).
49. Miles Johnson, “Hedge Fund Nightmare Turns into a Dream,” Financial Times (November 5, 2014), www.ft.com/content/7953c1f8-64e7-11e4-bb43-00144feabdc0 .
50. Tony Robbins, Money: Master the Game. 7 Simple Steps to Financial Freedom (Simon & Schuster, 2014).
Chapter 11
1. “The Trading Tribe” (forum response), The Trading Tribe , www.seykota
.com/tribe/ .
2. Alexander M. Ineichen, Absolute Returns (New York: John Wiley & Sons, Inc., 2003): 64.
3. Keith Campbell, “Campbell & Company,” Managed Account Reports .
4. Carla Cavaletti, “Turtles on the Move,” Futures 27, no. 6 (June 1998): 77.
5. Jerry Parker, “The State of the Industry,” Managed Account Reports, Inc . (June 2000).
6. “Who’s to Blame Next?” Asterias Info-Invest , Asterias, Ltd.
7. Parker, “The State of the Industry.”
8. Richard Dennis, “The State of the Industry,” Managed Account Reports, Inc . (June 2000).
9. Bill Dunn (presentation, MAR’s Mid Year Conference on Alternative Investment Strategies, June 22–24, 1999).
10. Van K. Tharp, “Interview with Two Super Traders.”
11. Max Gunther, The Zurich Axioms (New York: New American Library, 1985).
12. W. H. Auden and L. Kronenberger, eds., The Viking Book of Aphorisms (New York: Viking Press, 1966).
Section II: Trend Following Interviews
1. Stephen Mitchell, The Second Book of the Tao ( New York: Penguin Books, January 5, 2010).
Chapter 12
1. “Ed Seykota,” Wikipedia , last modified August 5, 2016, https://en.wikipedia
.org/wiki/Ed_Seykota .
2. Tobias J. Moskowitz, Yao Hua Ooi, and Lasse Heje Pedersen, “Time Series Momentum,” Journal of Financial Economics 104 (July 11, 2011), 228–250.
3. Ross Lincoln, “Blumhouse and the Calculus of Low Budget Horror—Produced By,” Deadline (May 30, 2015), http://deadline.com/2015/05/blumhouse-panel-produced-by-conference-1201435034 /.
4. Spyros Makridakis, Dance with Chance: Making Luck Work For You
(London: Oneworld Publications, 2010).
5. Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds (New York: Dover, 2003).
Chapter 13
2. Fred Schwed, Where Are the Customers’ Yachts?: or A Good Hard Look at Wall Street (Hoboken, NJ: John Wiley & Sons, Inc., January 10, 2006).
Chapter 16
2. Nassim Taleb, The Black Swan: The Impact of the Highly Improbable (New York: Random House, May 11, 2010).
Chapter 18
1. “Lasse Heje Pedersen,” Wikipedia , last modified November 10, 2016, https://en.wikipedia.org/wiki/Lasse_Heje_Pedersen .
3. Nassim Taleb, The Black Swan: The Impact of the Highly Improbable (New York: Random House, 2010).
4. Andy Greenberg, “Want to Know Julian Assange’s Endgame? He Told You a Decade Ago,” Wired , October 14, 2016, www.wired.com/2016/10/want-know-julian-assanges-endgame-told-decade-ago/ .
6. David Harding, Winton Capital Management (May 2015).
7. Brian Christian and Tom Griffiths, Algorithms to Live By: The Computer Science of Human Decisions (New York: Brilliance Audio, 2016).
Section III: Trend Following Research
1. Howard Marks, The Most Important Thing (New York: Audible Studios on Brilliance Audio, March 8, 2016), 36.
2. Anders Ericsson, Peak: Secrets from the New Science of Expertise (New York: Eamon Dolan/Houghton Mifflin Harcourt, 2016).
3. Robert P. Seawright, “A Hierarchy of Advisor Value,” Above the Market , February 12, 2016, https://rpseawright.wordpress.com/2016/02/12/a-hierarchy-of-advisor-value/ .
Chapter 19
Bailey, D., and M. Prado, “Drawdown–Based Stop–Outs and the ‘Triple Penance’ Rule” (working paper), 2013.
Grant, J. The Great Metropolis (Philadelphia: E. L. Carey & A. Hart, 1838).
Greyserman, A., “The Multi-Centennial View of Trend Following,” ISAM white paper (2012).
Jegadeesh, N., and S. Titman. “Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency,” Journal of Finance 48, no. 1 (1993): 65–91.
Kaminski, K., “Managed Futures and Volatility: Decoupling a ‘Convex’ Relationship with Volatility Cycles,” CME Market Education Group (May 2012).
Moskowitz, T., T. Ooi, and L. Pedersen, “Time Series Momentum,” Journal of Financial Economics , no. 104 (May 2012).
Taylor, B., “The GFD Guide to Total Returns on Stocks, Bonds, and Bills (working document),” Global Financial Data , www.globalfinancialdata
.com/News/Articles/The_GFD_Guide_to_total_returns.doc .
Thompson, Earl. “The Tulipmania: Fact or Artifact?” Public Choice 130, nos. 1–2 (2007): 99–114.
Chapter 20
1. “There is no other proposition in economics which has more solid empirical evidence supporting it than the efficient market hypothesis,” as M. Jensen famously wrote in 1978.
2. Together with a third scientist, Lars Hansen, who had not directly taken part in the debate.
3. Futures markets allow traders to go short as easily as going long. Therefore, both up-trends and down-trends can be exploited equally.
4. Jensen (1978) actually stressed the importance of trading profitability in assessing market efficiency. In particular, if anomalous return behavior is not definitive enough for an efficient trader to make money trading on it, then it is not economically significant.
5. Note that the excess return of trends cannot be classified as a risk premium either (see Lempérière et al. 2014; Narasimhan and Titman 2011). On the contrary, trend following is correlated with “long-vol” strategies.
6. We call this a fictitious P&L since no attempt is made to model any realistic implementation costs of the strategy.
8. Anecdotally, based on a long history of Capital Fund Management (CFM) inflows and outflows, our experience suggests that professional investors have a strong tendency to “chase performance,” i.e., to invest in CFM’s funds after a positive rally and redeem after negative performance.
9. Within their model, Giardina and Bouchaud (2003) show that, without an element of trend following, markets quickly reach an “efficient” stationary state where nothing much happens.
References
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Bouchaud, J. P., “Crises and Collective Socio-economic Phenomena: Simple Models and Challenges,” Journal of Statistical Physics , 151 (2013): 567.
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Bouchaud, J. P. and M. Potters, “Theory of Financial Risk and Derivative Pricing,” Cambridge University Press (2003).
Clare, A., J. Seaton, P. N. Smith, and S. Thomas, “Trend Following, Risk Parity and Momentum in Commodity Futures” (working paper), http://dx.doi.org/10.2139/ssrn.2126813 .
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Appendix
The 13 trend following models used in the paper are as follows:
1. MOP : The strategy goes long/short each market for one month, based on the sign of its past 12 month return. Based on the “Time Series Momentum” paper by Moskowitz, Ooi, and Pedersen.2
2. HOB : Applies a similar methodology to MOP but considers an average of look-back periods ranging from 1 to 12 months. Based on the “Is This Time Different? Trend Following and Financial Crises” paper by Hutchinson and O’Brien.3
3. LDSPB : Captures the direction of price deviations from a long-term exponentially weighted moving average. Based on the “Two Centuries of Trend Following” paper by Lemperiere et al. of Capital Fund Management.4
4. DMI : Directional movement indicator, designed to differentiate between strong and weak trends.
5. RSI : Relative strength index, a technical momentum indicator designed to compare the magnitude of recent gains to recent losses.
6. Turtle-ATR : Channel breakout strategy which uses the Average True Range, an alternative to standard deviation to measure price volatility.
7. Turtle-Boll. BO : Breakout strategy that uses Bollinger Bands® to identify breakouts, a tool which involves a moving average approach and setting upper and lower bands based on standard deviations above and below the moving average.
8. Turtle-Donchian : Breakout strategy that includes an additional trade entry condition based on comparing short and long exponential moving averages.
9. Turtle-3x MA : Moving average using three time horizons: fast, medium and slow, to determine trade entry and exit.
10. Z-Score : Statistical model designed to estimate price drift, relative to the volatility of returns.
11. Trend Deviation : Double exponentially weighted moving average approach.
12. MA Crossover : Uses the difference between a moving average over a short window, and one over a longer window.
13. Percentile : Uses percentiles of recent prices averaged over a short window, from a longer-term distribution.
Chapter 22
1. See AHL Research (2014).
2. Sharpe (1964) for the CAPM. Higgs (1964) for the Higgs Boson.
3. See Black, Jensen, and Scholes (1972) and Fama and MacBeth (1973).
4. A 2009 brochure put the cost of the machine at about $4 billion and this does not include all other costs. See http://cds.cern.ch/record/1165534/files/CERN-Brochure-2009-003-Eng.pdf , retrieved July 10, 2014.
5. CMS (2012) and ATLAS (2012).
6. See Baglio and Djouadi (2011).
8. See Simon-Sanchez et al. (2009).
9. When returns are realized at higher frequencies, Sharpe Ratios and the corresponding t -statistics can be calculated in a straightforward way. Assuming that there are N return realizations in a year and the mean and standard deviation of returns at the higher frequency is μ and σ, the annualized Sharpe Ratio can be calculated as (μ × N) / (σ × √N) = (μ / σ) × √N.
The corresponding t -statistic is (μ / σ) × √(N × Number of years). For example, for monthly returns, the annualized Sharpe Ratio and the corresponding t -statistic are (μ / σ) × √12 and (μ / σ) × √(12 × Number of years), respectively, where μ and σ are the monthly mean and standard deviation for returns. Similarly, assuming μ and σ are the daily mean and standard deviation for returns and there are 252 trading days in a year, the annualized Sharpe Ratio and the corresponding t -statistics are (μ / σ) × √252 and (μ / σ) × √(252 × Number of years).
10. See AHL Research (2014).
11. See Barras, Scaillet, and Wermers (2010).
13. See Schweder and Spjotvoll (1982).
14. More specifically, c(M) = 1 + 1/2 + 1/3 . . . + 1/M = ∑MM1/ii and approximately equals log(M) when M is large.
15. For the p -value thresholds, whether or not BHY is more lenient than Holm depends on the specific distribution of p -values, especially when the number of tests M is small. When M is large, BHY implied hurdles are usually much larger than Holm.
16. We have 269 monthly observations for the strategies in the “Price Momentum” and “Capital Efficiency” groups and 113 monthly observations for the strategies in the “Analyst Expectations” group. Therefore, the t -statistics are calculated as 0.83 × √(269 / 12) = 3.93, 0.37 × √(113 / 12) = 1.14 and
0.67 × √(269 / 12) = 3.17.
17. Applying the Bonferroni test, the three p -values are adjusted to be 0.0387, 1.0, and 0.7260. The corresponding adjusted Sharpe Ratios are 0.44, 0, 0.07 and the haircuts are 47%, 100%, and 90%. These haircuts are larger than under the BHY approach.
18. See AHL Research (2014). The 0.45 is based on 16 partitions of the data.
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Chapter 27
1. Since our focus is generally on derivatives markets, we do not cover single stocks in this study.
2. To guard against occasional bad data in the early part of the sample, we in fact use a trailing average of the last 10 days, with the two biggest outliers removed (i.e., a central 8/10 mean).
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Epilogue
1. Alan Watts, The Wisdom of Insecurity (New York: Knopf, 2011).
2. Charles Faulkner, “Inside the Counterintuitive World of Trend Followers: It’s Not What You Think. It’s What You Know,” Stocks, Futures & Options Magazine, April 2005.
3. Ken Durr, “Interview with David Harding,” Securities and Exchange Commission Historical Society, June 18, 2013.
6. Daniel C. Dennett, Intuition Pumps and Other Tools for Thinking (New York: W. W. Norton, 2013).
About the Author
1. Denise G. Shekerjian, Uncommon Genius (New York: Penguin, 1990).
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