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Opinion
Matthew Brooker

The Finance Research Crisis Is All Too Human

Gaming the system to get published, or just misled by inherent fallibility? Academics with market-beating strategies may be wrong far too much of the time. Be skeptical.

Is that rustling in the grass statistically reliable enough to jump?

Is that rustling in the grass statistically reliable enough to jump?

Photographer: Wolfgang Kaehler/LightRocket/Getty

Finance research is in a difficult moment, with one influential professor estimating that half the market-beating strategies published in leading journals are duds. The academics shouldn’t be too hard on themselves. It’s only human to see patterns and construct narratives around events that are essentially random — as journalists, among others, know only too well.

The doubts swirling around academic finance mirror a broader “replication crisis” in scientific research that dates back to the mid-2000s. If a study’s findings are valid, then other researchers should be able to duplicate them. In fields including psychology and medicine, it turns out that many papers don’t pass the test. The same scrutiny applied to financial research has been no less forgiving.