Ranking Empirical Evidence in Finance

23 Pages Posted: 3 May 2023 Last revised: 8 Jul 2023

See all articles by Marcos Lopez de Prado

Marcos Lopez de Prado

Cornell University - Operations Research & Industrial Engineering; Abu Dhabi Investment Authority; True Positive Technologies

Date Written: April 21, 2023

Abstract

Recent progress in causal inference has opened a path, however difficult, for advancing financial economics beyond its current phenomenological stage. The goal of this article is to propose a hierarchy of empirical evidence, recognizing that not all types of observations have the same scientific weight, in the sense of enabling the falsification of causal claims.

Keywords: Association, causation, causal inference, causal discovery, causal mechanism, confounder, factor investing, backtest overfitting.

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

Suggested Citation

López de Prado, Marcos and López de Prado, Marcos, Ranking Empirical Evidence in Finance (April 21, 2023). Available at SSRN: https://ssrn.com/abstract=4425855 or http://dx.doi.org/10.2139/ssrn.4425855

Marcos López de Prado (Contact Author)

Cornell University - Operations Research & Industrial Engineering ( email )

237 Rhodes Hall
Ithaca, NY 14853
United States

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

Abu Dhabi Investment Authority ( email )

211 Corniche Road
Abu Dhabi, Abu Dhabi PO Box3600
United Arab Emirates

HOME PAGE: http://www.adia.ae

True Positive Technologies ( email )

NY
United States

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

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