Today's note, "Adaptive Investing: What's Your Market DNA?", begins 2014 with a new series of notes that I hope will stitch together many of the various Epsilon Theory threads I've been writing about over the past six months. It's a lengthy note (even for me) as there's a lot of introductory ground that has to be covered, but here's the basic premise: the human animal is hard-wired to participate in markets not only as a self-interested individual but also, whether we realize it or not, as a group-sensitive member of a distinct tribe speaking a distinct language with a distinct grammar. This perspective is totally alien to modern economic theory, and it opens up both the concepts and the toolboxes of evolutionary biology and linguistics, which is where I think you find the best game theory and information theory research of the past 20 years. I believe that much of what we find puzzling about markets today can be explained by seeing markets through this lens, and the potential is there to develop a useful new way of understanding risk and reward in portfolio construction ... Adaptive Investing.
Please feel free to forward the attached note to whomever you think might be interested, and all prior notes are available on the Epsilon Theory website. If you're receiving this note via forwarded email and you're not yet on the direct distribution list (and you find it a worthwhile read), I'd appreciate the opportunity to add you to the list. I'll be building the Adaptive Investing framework in plain sight and in real time through these notes, so I'd welcome the widest possible participation, as well as your thoughts and comments. As always, if you're no longer interested in receiving these notes, please reply to this email to that effect.
All the best,
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