Former fund manager uses AI to backtest his own investment strategy, which fails to outperform random stock selection
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A partner at a pre-retirement equity strategy firm and operator of an independent investment firm had AI test his lifelong investment strategy, with results showing the strategy did not outperform random selection, and ordinary index funds outperformed the strategy. The strategy combines Peter Lynch growth stock selection, Hilary Kramer undervalued obscure stock selection, and earnings revision discipline. The backtest corrected for survivorship bias, used point-in-time data, calculated pre-fee returns, and compared against random stock selection from the same investment pool.
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- CFA Institute Research and Policy Center: PublicationsA veteran former fund manager used AI to test his lifelong investment strategy
A former equity strategy partner and independent investment firm operator used AI in retirement to backtest his long-standing personal strategy, which combined Peter Lynch's growth stock selection, Hilary Kramer's undervalued obscure stock selection, and earnings revision discipline. He corrected for survivorship bias, used point-in-time data, calculated pre-fee returns, and compared it against random stock selection from the same investment pool. The results showed that the strategy did not outperform random selection, with ordinary index funds performing better than the strategy.
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