While John was at Rice University in Texas, a successful entrepreneur/investor moved to Charlottesville and was looking for the right person to help him build a focused investment model for a certain niche in the stock market. After receiving positive references from the Systems Engineering department at the University of Virginia and a previous employer, he tracked John down in Houston.
“The stock market project turned out, against all predictions of investment theory, to be very successful. We had stumbled across a persistent pricing inefficiency in a corner of the market. A slight pattern emerged from the overwhelming noise which, when followed fearlessly, led to roughly a decade of positive returns that were better than the market and had only two-thirds of its standard deviation—a home run as measured by risk-adjusted return. My slender share of the profits provided enough income to let me launch Elder Research, Inc. (ERI) in 1995 when my Rice fellowship ended, and I returned to Charlottesville for good. Elder Research was one of the first data mining consulting firms…”