Monthly Archives: October 2010
Are momentum strategies antisocial?
We’ll get to “antisocial” via a look at a chapter in The Future of Finance from the London School of Economics. The chapter in question is “Why are financial markets so inefficient and exploitative?” by Paul Woolley. There are many things in this chapter with which I agree. There is roughly an equal number of … Continue reading
Posted in Fund management in general
Tagged active fund management, momentum, tracking error
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xkcd on market efficiency
This arrives via Marginal Revolution. But note that there is a check mark missing: Psychic fund management.
Posted in Fund management in general
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Backtesting talk, and other events
I will speak November 2 at the Thalesians on “Effective Backtesting”. Registration is now open. Abstract: Backtesting builds a bridge from the past to the future. These bridges are shaky and unstable. We’ll explore the ways they are likely to fall down. We’ll also show how random portfolios can strengthen the bridges. Details at http://www.thalesians.com/ … Continue reading
Deflation, inflation and blown tires
Jonathan Ruffer provides a brilliant metaphor regarding the possibilities for deflation and inflation. It is in the recent post by Jonathan Davis: Q and A with Jonathan Ruffer. I don’t see how I can improve on what is said there.
Posted in Economics
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Ideas for World Statistics Day
World Statistics Day is 2010 October 20. If you work with data or you should, then you are a statistician and this is a day for you. Try the Monty Hall problem on your mother. Start reading Bad Science. I mean the book, but here’s the blog. Take a step towards breaking your spreadsheet addiction … Continue reading
American TV does cointegration
Fringe provides an excellent example of cointegration. This is a television show in which there are two adjacent universes. The universes are almost alike but not exactly. Now, everyone knows that history is chaotic. If a butterfly does an extra flap of its wings, then that difference spreads out to change subsequent events everywhere. But … Continue reading
Anomalies meet volatility
Isn’t the horse facing the cart? “A New Look At Minimum Variance Investing” by Bernd Scherer (SSRN version) looks at a few aspects of minimum variance portfolios. We’ve been in this neighborhood before with The volatility puzzle solved? This post contains some comments on Bernd’s paper. Efficient frontiers My first concern with the paper is … Continue reading
Review of “Brain Rules” by John Medina
Finally, an operator’s manual for the human brain. You should read this book, but in the meantime I’ll summarize the rules over which you have some control: exercise don’t be boring repeat to remember sleep chill out don’t be boring don’t be boring be curious The greatest of these is curiosity. Schools A quote from … Continue reading
Posted in Book review
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A tale of two returns
It was the best of times, it was the worst of times. As you may have guessed, this is a mashup of a novel by Charles Dickens and an explanation of financial returns. The key plot element of A Tale of Two Cities is that there are two men, Charles Darnay and Sydney Carton, who … Continue reading
Posted in Quant finance, R language
Tagged aggregate returns, arithmetic return, arithmetic return vs geometric return, continuously compounded returns, geometric return, geometric return vs arithmetic return, gross return, log return, log return vs simple return, net return, simple return, simple return vs log return, total return
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