Edge is identification of risk which on a probabilistic basis is mispriced In conjunction with a system to exploit the mispricing.
Using data to sift out the possible existence of an edge and know it by no more than a posative expectancy calculation on historical data is fraught with danger. Most are mirages conjured by people snooping around in deserts of data destined to disappear as soon as you walk towards them.
Those oasis that may actually be real and stationary enough to be found can never sustain the throngs trying to survive off them for long. So why play such a stupid game unless you are indeed the fastest draw Quant in the game?
If you can't beat 'em, join them would have to be the dumbest advice in trading that I have ever heard.yet that is what the gurus on this thread seem to be saying. You have to get Quant to have a chance. I say rubish. I reckon they are just trying to baffle with bull**** either to hide the fact they are still stuck in the beginners cycle looking for new tech to give them the elusive answer to what eludes them or they are trying/preparing to sell something, even though of course they don't need to because this new thing is the holy grail and money can be made at will if only they desired to do so.
When I see people who I suspect are trying to fudge it with complexity totally misconstrue Buffett as part of their bedazzlement they wander into territory Where I know they have no idea what they are talking about and confirm my suspicions.
If you want a true Buffett direction in relation to this thread try this quote.
"I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over."
The 7 foot bar is finding your edge by reverse engineering data. It's not robust and the guy with the most money can buy the most toys and the most toys wins – at least until nobody wants to play with you any more. Even if you win you lose and you have to go find another group who's mummies have unwittingly made you lunch.
The 1 foot hurdles is understanding you edge qualitatively and putting in the elbow grease to effectively and safely exploit it on a probabilistic basis. Maybe you might even find that in an arena of physical economic business production – maybe a business that makes lunches, mmmmmm lunches forever without the hassle of who you going to take the next one off.
Data analyses can be a tool to gain knowledge and judgement. However plenty who can analyse data efficiently will never see the forest for the trees. Whilst the better you qualatativelly understand the cause of mispriced risk you seek to exploit the less reliant on historical data you will be.