Professors at colleges and universities are often called “Academics”. Much of their job is to write and publish “academic research papers”. It is no wonder you can find such a paper on most any topic. Investment management is a popular topic and it seems we see observe more and more such papers being cited and talked about.

Someone was telling me a story recently about the unethical use of the power of persuasion and influence. It reminded me how academic research is sometimes used to mislead people. For example, I read a book a few years ago that was supposedly in pursuit of finding alpha, but the entire book cited hundreds of academic studies promoting a passive asset allocation strategy. Yet, there wasn’t a single mention of the word “momentum” in the book, even thought there are over 300 academic papers that discovered alpha applying simple momentum/relative strength strategies. Momentum has even dis-proven the “Efficient Market Hypothesis”, but promoters of EMH call it an “anomaly” they can’t explain. I found the book misleading because of its title and content was conflicted – and it left out the one thing that even academics have found alpha.

I am often asked for my opinion about some of their research. I spend every day working on my edge. In addition to constant exploring and proprietary studies, I monitor and read many of the academic papers being published on topics I have interest and expertise, such as trend following, behavior finance (investor/trading psychology), volatility trading, global macro trading. I especially read studies about constructing trades with options and applying momentum. While some of these papers are worth reading and some even excellent, most of them seem to lack real world experience for application.

We have to consider that many of the people writing an academic paper don’t have any meaningful actual experience doing what they are writing about, so the studies are theoretical, conceptual, notional, philosophical, hypothetical, speculative, conjectural, and suppositional.

You may find it interesting that I found all those synonyms by looking up “academic” on Wikipedia. I thought it was interesting that their second definition of “academic” is “not of practical relevance; of only theoretical interest.”

As we think independently and critically about the world and our quests, we may keep this in mind as we read and cite academic research. That is in fact a function of being a good scholar and researcher, whether you do it for profit, or not. You may consider that it’s what you may be wrong about, or what you are missing, that should be your primary concern.