The 7 Reasons Most Machine Learning Funds Fail (Presentation Slides)

44 Pages Posted: 6 Sep 2017 Last revised: 4 Oct 2018

See all articles by Marcos Lopez de Prado

Marcos Lopez de Prado

AQR Capital Management, LLC; Cornell University - Operations Research & Industrial Engineering; RCC - Harvard University

Date Written: September 2, 2017

Abstract

The rate of failure in quantitative finance is high, and particularly so in financial machine learning. The few managers who succeed amass a large amount of assets, and deliver consistently exceptional performance to their investors. However, that is a rare outcome, for reasons that will become apparent in this presentation. Over the past two decades, I have seen many faces come and go, firms started and shut down. In my experience, there are 7 critical mistakes underlying most of those failures.

This paper is partly based on the book Advances in Financial Machine Learning (Wiley, 2018). A full paper can be downloaded at: http://ssrn.com/abstract=3104816.

Keywords: Machine learning, investment strategies, quantamental investing, backtest overfitting

JEL Classification: G0, G1, G2, G15, G24, E44

Suggested Citation

López de Prado, Marcos, The 7 Reasons Most Machine Learning Funds Fail (Presentation Slides) (September 2, 2017). Available at SSRN: https://ssrn.com/abstract=3031282 or http://dx.doi.org/10.2139/ssrn.3031282

Marcos López de Prado (Contact Author)

AQR Capital Management, LLC ( email )

One Greenwich Plaza
Greenwich, CT 06830
United States

HOME PAGE: http://www.aqr.com

Cornell University - Operations Research & Industrial Engineering ( email )

237 Rhodes Hall
Ithaca, NY 14853
United States

HOME PAGE: http://www.orie.cornell.edu

RCC - Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

HOME PAGE: http://www.rcc.harvard.edu

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