Monthly Archives: September 2010
Upcoming events
• LondonR Group will meet 2010 October 05 6PM – 9PM The Counting House, 50 Cornhill near Bank, London. See details at http://www.londonr.org/ • The HEC Finance and Statistics Conference will be held 2010 October 08 in Paris. Details are at http://appli7.hec.fr/reunion/financeandstatistics2010/ • Patrick Burns is scheduled to talk on “Effective Backtesting” on 2010 November … Continue reading
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Review of “The Happiness Equation” by Nick Powdthavee
Your happiness probably lies outside this book. Fund management If you think this topic remote from fund management, I think you’re wrong. Suppose that we deliver a lot of wealth to a person as they retire. We’ve done well in terms of wealth management. Now, suppose that we made the world an undesirable place in … Continue reading
Ancient portfolio theory
Before we get to the meat of the subject, I just have to comment on the “modern” of Modern Portfolio Theory. Figure 1: Modern telephone switch Figure 1 shows us a modern telephone switch. As a bonus we get to see some modern women. Why don’t we have “portfolio theory” instead of “Modern Portfolio Theory”? … Continue reading
Physical economy v social economy
There’s a hole in the bucket of traditional economics. Homo socialus seems to be on the rise, and homo economicus is getting harder to find. Vulcanism has become evident in the R community over the last several days. One of the visible eruptions has been over money. This resulted in a blog post by Tal … Continue reading
The volatility puzzle solved?
Finance textbooks say that more volatile assets should have higher returns. The volatility puzzle is that that doesn’t always hold true. You should be getting used to textbooks not always being right. Harin de Silva gave a talk last week entitled “Low Volatility Portfolios: A Free Lunch?” at a meeting of the CFA Society of … Continue reading
Psychic fund management
I had considered doing a satire on using astrology to do fund management. Something along the lines of Capgemini is a Pisces, perhaps. Reality seems to have beat me to the punch: http://www.thedeal.com/video/inside-the-deal/wall-streets-psychic.php Another story idea up in flames.
Posted in Fund management in general
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Perception switching
The current New Scientist includes an article about perception switching. They use the figure below. “Why your brain flips over visual illusions” is about the brain and perceptual switching (the on-line version also has a great video to play with). These sorts of illusions provide a metaphor for how we should act when doing statistical … Continue reading
Implied alpha — almost wordless
We have a portfolio with weights A=20%, B=60%, C=20%. That we have this particular portfolio is really a market prediction. What are the returns that the portfolio is “expecting”? In technical terms, we want the implied alpha of the portfolio (found via reverse optimization). We’ll explore this in a mostly pictorial fashion. Eventually we do … Continue reading
