Evidence based investing is an investment philosophy and practice that relies on empirical research — what has actually worked in financial markets over long periods, across multiple geographies and asset classes — as the foundation for investment decision-making. Rather than following conventional wisdom, market narratives, or the claims of investment product marketers, evidence based investors ask: What does the actual data show? Is the evidence robust, reproducible, and consistent with a sound theoretical explanation?

The Core Principles

Evidence based investing rests on several core principles. First, theory must be supported by data: an investment approach is credible only if it has demonstrated consistent returns in actual historical data across diverse markets and periods. Second, the evidence must be independent of the data used to discover it: out-of-sample testing and live trading results are more informative than backtests optimized on the same data used to develop the strategy. Third, the explanation must be sound: there must be a compelling reason why the identified pattern should persist rather than being arbitraged away as it becomes widely known.

Well-Documented Return Drivers

Several return drivers have met the standard of evidence based investing. Momentum — the tendency for recent price winners to continue outperforming — has been documented in equity, fixed income, currency, and commodity markets globally over a century of data. The value premium — the tendency for cheap stocks to outperform expensive ones over long periods — is similarly well-documented, though subject to long periods of underperformance. Trend following — reducing exposure to falling markets and increasing it to rising ones — has demonstrated risk reduction benefits across all major asset classes over multiple decades.

Evidence Based Investing at Shell Capital

Shell Capital’s Asymmetry® investment process is explicitly evidence-based: built on return drivers with robust empirical support across global markets and multiple decades. We do not rely on black box models, arbitrary indicators, or the latest market narrative. Every element of the investment process is grounded in evidence that meets the standards of rigorous empirical research.

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