tag:blogger.com,1999:blog-2568941354104807757.post9047857156233579147..comments2023-10-05T09:07:24.225-04:00Comments on Investment Performance Guy: I can't hear you because it's too noisyDave Spauldinghttp://www.blogger.com/profile/01777929408680234896noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-2568941354104807757.post-61885298554823938482011-03-31T18:19:39.419-04:002011-03-31T18:19:39.419-04:00"Noise" usually implies that there exist..."Noise" usually implies that there exists a "signal". The noise/signal distinction is very big in engineering, information theory, science in general. I am not sure at all whether the signal/noise distinction makes sense in the context of security returns: price changes must follow a random walk on informatio efficient markets (random walks are noise processes). Even on only partially efficient markets, the price discovery process will result in "unexplainable" patterns (because the discovery process is a learning process about the unexplained). On the other hand, Modern Portfolio Theory is based on a signal / "noise" partition: systematic and unsystematic (=diversifiable noise) risk. Keynes wrote about signal/noise. "Noise" is a very interesting topic, but a "noisy" one :-)Andreas Steinerhttp://www.andreassteiner.net/performanceanalysisnoreply@blogger.com