Sensing that some things simply don’t add up, certain mathematicians have banded together to alert the public. Their web site explains:

Mathematicians Against Fraudulent Financial and Investment Advice (MAFFIA)This site was created out of growing concern with the usage of less-than-fully rigorous mathematical and statistical methodologies in the financial/investment world….

We are also concerned with the proliferation of quasi-mathematical investment advice and financial columns in the past few years, which appear to be based on sophisticated mathematics and statistics, but which, upon more rigorous analysis, are at best questionable. We encourage the reader to search the Internet for terms such as “stochastic oscillators,” “Fibonacci ratios,” “cycles,” “Elliot wave,” “Golden ratio,” “parabolic SAR,” “pivot point,” “momentum,” and others in the context of finance. Although such terms clearly evoke precise mathematical concepts, in fact, in almost all cases, their usage is at best scientifically unsound….

Our approach here is not one of confrontation, but instead one of research to better understand and mitigate these difficulties, education to assist other professionals in the field, together with unbiased testing and analysis. If you identify with our concerns, let us know and spread the word. Together we can make a difference.

One of their alerts takes the form of a paper:

“Pseudo-Mathematics and Financial Charlatanism: The Effects of Backtest Overﬁtting on Out-of-Sample Performance,” David H.Bailey [pictured above], Jonathan M. Borwein, M. Lopez de Prado, and Qiji Zhu,

Notices of the AMS, vol. 61, no. 5, May 2014, pp. 458-71.

For an overview of this, see “The Dangerous Mathematical Con of Hedge Funds and Financial Advisers“, by Ryan Jacobs, in the *Pacific Standard*.

(HT Jennifer Ouellette)

BONUS (related, and also HT Jennifer Ouellette): Chris Holdgraf’s “how I learned to stop worrying and love errorbars“