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

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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.

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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 … Continue reading

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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.

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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

Posted in R language, Statistics | Tagged | 5 Comments

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

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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

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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

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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

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