What Is Evidence-Based Investing?

The dictionary defines 'evidence-based' as follows: Denoting an approach to medicine, education, and other disciplines that emphasizes the practical application of the findings of the best available current research.
Wikipedia expands thus: "The movement towards evidence-based practices attempts to encourage, and in some instances to force, professionals and other decision-makers to pay more attention to evidence to inform their decision-making. The goal of evidence-based practice is eliminate unsound or outdated practices in favor of more effective ones by shifting the basis for decision making from tradition, intuition, and unsystematic experience to firmly grounded scientific research."

The above perfectly describes what, for me, is the essence of evidence-based investing.  It's the explicit acceptance of what decades of data and academic research tells us actually works, and the challenging and eschewing of 'traditional' investment policy when it's not supported by facts and evidence.

 

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