Markets and People, II

Reader Jay Horne writes in response to my earlier post quoting Charles Morris, “After working on mechanical trading systems for the past several years (and having some success), I would suggest that it is the lumpiness, the human factors, that exactly create the opportunity for success with a mathematical system. I believe Mr. Morris has it exactly backwards. And mathematics is too broad, we’re talking about repeatable, identifiable trades that have a statistical edge of some sort that can be exploited. It is human greed, fear, and folly that create such opportunities, not some completely random, costless, gaseous system. Humans, on the edge of their emotional range, become remarkably predictable.”