Good thoughts. And ultimately it may take a lot of ideas to express our present situation.
The idea that there are a series of events for us to have only 8% of Designer Models beating their benchmark over a 5 year period is a good one. And as Georg said:
the excess 5-year return over SPY= -43.8%
Not wrong to think there may be multiple problems including the above ideas, I would guess. I am not sure it is even possible for just one thing to do this.
I think posts implying there is just one problem–so no worries–are pure speculation.
BTW, Does equal weighting remove the problem of overfitting? I think not. Otherwise, feature selection to remove noise factors would not be the standard of for statistical learning. Look to Georg’s suggestion of AIC for an informed idea about removing noise factor that cause overfitting. You may need to search it for now.
Generally, factors are removed and not given equal weight to prevent overfitting.
Which is not to say overfitting is the only problem. But I see no evidence that it is not one of the factors—not in this thread for sure. I do think P123 should hire a consultant to give us the tools to end overfitting when it is a problem for a Designer.
-Jim