The process of removing falsified hypotheses permanently from the set of still true emergent laws. The result is the actual empirical knowledge.

We generated 400 time series of returns of different trading strategies based on daily S&P500 prices from 1885 to 2014.

The statement “this strategy is profitable for every 15 year-period” is forever falsified for any strategy whose cumulated returns result in a loss over any 15 year-period These strategies will be removed from the set of surviving strategies.

Inductive Filter

Step by step only strategies that made profit over a growing period of time survive the filtering process. The statement, that these surviving strategies make a profit in every 15 year period (empirically deterministic laws) becomes more often verified.

We can see that all strategies that survived the Great Depression and World War II have made a 15 year-profit ever since.

By looking at sets of laws that have been verified a certain number of times (T) at different points in time t, we can empirically evaluate for example their tendency to be true in time windows (t+1..t+n).

So we can gain empirical evidence about the performance of predictions made by T-times verified laws in general. We can use this evidence to make empirically informed judgements about the trust we can have in predictions made by T-times verified empirically deterministic laws.