Tony Hamilton:

It is nearly impossible to acquire statistics on the %ROI and %STDEV on individual investment strategies. This can be for a number of reasons. Some people, such as yourself, are not willing do publicly divulge specifics. More often, in all likelihood, those figures divulged are inaccurate or biased in some way.

Sounds like another use for the hypothetical Auditing Protocol recently mentioned on the cypherpunks list. The problem is to figure out a way to audit the accounts of a bank, to determine if there are sufficient reserves, without divulging information on the accounts therein, or having to trust an outside auditing agency with the accounts' privacy. If such a protocol could be discovered it might also apply to this problem (or vice versa), how to audit the returns of an investment fund or strategy, without revealing information on the participants in such a fund, or revealing the specific strategy. One approach might be to express the strategy as a unique string which hashes to a unique digital signature, which can then be published along with the returns. Has anybody thought of a more formal way to express this problem? Ways to audit a bank without divulging customer privacy were also discussed at that July Bay Area cypherpunks meeting, and I'll bring up the question again this Saturday.

[figures from govn't & schools relatively unbiased]

Governments are quite biased by political concerns, eg the desire to raise taxes and spending, to make themselves look good for elections, etc. Schools have to worry about their government and corporate sponsors, and both worry about political popularity & correctness, which is hardly unbiased. For example the Luddite reaction against program trading after the '87 crash, the reaction against corporate takeovers by "uppity Jews" like Milken in the 80s, etc. along with the biased statistics used to make cases for arguments against "junk" bonds, program trading, etc. Most importantly, these government and university people have no incentive to get it right, while S&P et. al. make their business on their reputation of getting it right. If it was discovered somebody was bribing S&P to cook the books you could be sure their competitors would make a Big Deal about it. In cases where there is no long-standing reputation on the line (and no trustworthy auditors, whether agencies or algorithms) I join you in being dubious about investment claims. Nick Szabo szabo@netcom.com