Ep. 935: Trends, Psych and Felonies with Michael Covel on Trend Following Radio
Michael Covel's Trend Following
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The Importance of Theory in Economics
"You need theory, you need data and i think you need psychology the reason you need theory is just the reason that you said the fed produces 45,000 different pieces of economic data," he says. "If you put all of these data points in a blender and regress them against the smp500 over the last 100 years you're going to find some correlations ... there's all the funny ones there's what is it like a 95 correlation between moves in the smp and bang with dashy butter production" He continues: "I could take you to so many different pieces in your work but I love this line here Data without theory and theory without data produce spurious results"
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Transcript
