Subject: Re: PRC and Domestic Investing
Possibly none. But I don't know, hence my question. Most of our MI algorithms are predicated on rebalances much more often than annually: the Virus crisis in the PRC will take longer than that to unroll and settle out.

Why is the PRC so much in your attention? Usually the most consequential future events related to economics (or for that matter, anything) aren't the ones in the news today. The data for MI screens is rather confined to US stocks, plus sometimes we use database covering European stocks, because the information standardisation is important. I'm even going to question for a momentary if it is more reliable information, but as a practical matter we have developed most of the testing/screening infrastructure around US stocks. Then, as for 'exogenous influences' on US stocks, the China's policy for Covid is hardly important. What will be important will be something that you are not modelling, that will happen (random() * 10) years from now, and is not being discussed, and not able to be determined - which is part of the value of MI - we don't try to speculate about it.

The whole point of doing 20, 30, 40 or 100 year backtests, and giving enormous weight to post-discovery data, is to find criteria that was robust over long periods including what we think of as 'exogenous' phenomena, much of it far more consequential than what Covid was or will be. I do put in bold the word 'was' as most MI practitioners inadvertently use the word 'is', and the distinction is important, but it is the best we have.

Regarding market timing, it certainly can be part of MI, beginning with a mechanical decision to time or not, and if so, following mechanically the mechanically derived (if not effectively backtested for efficacy) the timing criteria.

I definitely advocate philosophical discussions here, and enjoy to see more, and more - and especially some of the other Shrewdom boards, however the practice of MI is highly, highly pragmatic. If you have a process to decide if backtesting can be used, try to define it rather than only proposing that it could be possible. Upon defining it, you, or someone can try to backtest it. But ready? An idea that seems sound, or not only sound but seems brilliant, in theory, can often give surprisingly terrible results when tested or applied with a real portfolio - that is the nature of markets, or it might even so greatly underperform the market that it can become useful as candidate for a good shorting screen. I don't want to sound harsh, but this is the way the world works.

Enjoying the discussion.

- Manlobbi