People invest in people,
Despite this fact, the scientific analysis of behavioral factors related to investment performance is almost universally ignored.
Investment performance cannot be predicted from past investment returns, however, it is possible to predict future human behavior from past human behavior.
We see this fact as an overlooked opportunity, and a unique competitive edge of our investment approach.
The Highmore team has spent years refining and developing proprietary behavioral analytics to be used in our investment selection, risk management, and client profiling processes -
all outgrowths of the doctoral research of one of our co-founders at Oxford.
The Theory Behind The Practice
Investments Continue To Be Selected Based On A False Premise
Prediction and selection of future investment returns based upon past investment performance is misguided. Nevertheless, most investments continue to be chosen based upon backward looking data which has little or no predictive relationship to future performance.
Highmore defines this as the Quantitative Attribution Fallacy - basically meaning that investors choose investments based on false selection criteria.
The Quantitative Attribution Fallacy
Non - Predictive
An over-reliance on past performance in investment selection can reduce the probability of investment success
If Performance Is Not A Good Predictor Of Investment Performance, Then What Is?
Highmore believes that most investments are, in fact, investments in people, and that the missing factor in investment selection is also the most obvious one - human behavior. This is an important revelation as very few investors consider the most predictive factor of all, that of human behavior, in any scientific manner when selecting investments.
Highmore created analytical tools where none existed in order to identify the link between human behavior and investment performance.