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The hidden ‘replication crisis’ of finance

Financial Times: “The hidden ‘replication crisis’ of finance. Are swaths of prestigious financial academic research statistically bogus? Campbell Harvey, professor of finance at Duke university, who believes that at least half of the 400 supposedly market-beating strategies identified in top financial journals over the years are bogus. It may sound like a low-budget Blade Runner rip-off, but over the past decade the scientific world has been gripped by a “replication crisis” — the findings of many seminal studies cannot be repeated, with huge implications. Is investing suffering from something similar?…Harvey is not some obscure outsider or performative contrarian attempting to gain attention through needless controversy. He is the former editor of the Journal of Finance, a former president of the American Finance Association, and an adviser to investment firms like Research Affiliates and Man Group. He has written more than 150 papers on finance, several of which have won prestigious prizes. In fact, Harvey’s 1986 PhD thesis first showed how the bond market’s curves can predict recessions. In other words, this is not like a child saying the emperor has no clothes. Harvey’s escalating criticism of the rigour of financial academia since 2015 is more akin to the emperor regretfully proclaiming his own nudity…”

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