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Viliam_Bur comments on [Link] Algorithm aversion - Less Wrong Discussion

17 Post author: Stefan_Schubert 27 February 2015 07:26PM

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Comment author: Viliam_Bur 28 February 2015 10:11:31PM 2 points [-]

If people trust human forecasters over machine forecasters, but the machine forecasts are better, just use the machine secretly, and take all the credit.

Comment author: Stefan_Schubert 01 March 2015 07:48:34AM *  3 points [-]

Indeed. That is precisely what the so-called "closet index funds" are doing. They are said to be actively managed funds, but are in reality so-called index trackers, which just are tracking the stock market index.

The reason the managers of the fund are using index-tracking algorithms rather than human experts is, however, not so much that the former are better (as I understand they are roughly on par) but that they are much cheaper. People think that the extra costs that active management brings with it are worth it, however, since they erroneously believe that human experts can consistently beat the index.

Comment author: V_V 03 March 2015 01:58:42AM 0 points [-]

The reason the managers of the fund are using index-tracking algorithms rather than human experts is, however, not so much that the former are better (as I understand they are roughly on par)

Maybe human experts tend to track the index anyway?