Re:How Wall Street Lied to Its Computers
by jimbokun on Thursday September 18, 2008 @05:19PM
(#308598)
I thought this was a great analogy to express your conclusion:
"It was like a weather forecaster in Houston last weekend talking about the onset of Hurricane Ike by giving the average wind speed for the previous month."
The thing is that quants who come up with models showing large amounts of risk to otherwise profitable investments aren't as popular as ones who say everything is just fine. So there is a clear incentive for models to be optimistic.