Newfound Research explores how investors often draw misleading conclusions from historical market data, especially when evaluating strategies and asset performance. The paper challenges common assumptions by showing how selective timeframes and data biases can distort outcomes, raising questions about how much investors can truly rely on history.
Misleading Lessons of History
Newfound Research
Corey Hoffstein, Justin Sibears
Research
8 Pages
Key Takeaways
Timeframe Sensitivity Matters: Changing the start date by just 10 years can shift equity return outcomes by over 4%, materially altering perceived strategy effectiveness.
Survivorship Bias Impact: Excluding failed assets can inflate historical returns by 1–2% annually, overstating real-world performance investors could have achieved.
Regime Dependence Risk: Asset correlations can swing from near 0 to above 0.8 across regimes, undermining diversification assumptions during stressed market periods.
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