Trend Following, 5th Edition

17 Campbell Harvey

Campbell Harvey is a Canadian economist, known for his work on asset allocation with changing risk and risk premiums and emerging markets finance. He is currently the J. Paul Sticht Professor of International Business at Duke University’s Fuqua School of Business in Durham, NC.¹

We know that we know almost nothing. But the “almost nothing” we know isn’t completely nothing, and we only bet on that.

David Harding

Michael:

Outline your example that goes into American football and let people slowly come into your thinking.

Campbell:

There are plenty of sports examples here. And football is one of them, where a team could have many wins in a row or a quarterback many passes in a row. And the issue: Is that due to skill, is it luck or is it a combination? It’s also the case that a 
quarterback could appear to do quite poorly and not [make] that many passes. That doesn’t necessarily mean that quarterback lacks skill, it could just be bad luck.

It’s the same thing with investment managers where you can outperform the market many, many years in a row. It’s not clear that’s a result of skill or a result of just good luck. It is a vexing problem in finance: How do we separate the skill from the luck?

Michael:

As you were talking about beating the market for many years in a row, I thought of someone. I’m quite fond of him. He’s liked some of my work and I’ve had a chance to meet him several times. He had a fantastic run at Legg Mason, and that’s Bill Miller. 
I ...