There are two types of technology: Good (does exactly as wanted, with no hassle) Primitive (all the rest) This classification has been instilled into me by my wife. The stock market is primitive. Unbroken history Current stock markets are not much different than when the New York Stock Exchange was the shade of a buttonwood … Continue reading
Portfolio Probing
R is a name you need to know
As if that is news to some of you. Forbes has a Mean Business blog post by Steve McNally titled “Names You Need to Know in 2011: R Data Analysis Software”. The post includes several links to why R is wonderful. It also includes a pretty — but seemingly useless — statistical graph. Correct me … Continue reading
Posted in R language, Statistics
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The ARORA guessing game
The game ARORA (A random or real array) is a website that gives you two time series at a time. Your job is to guess which series is real market data and which is permuted data. It’s fun — try it. With some practice you will probably be able to guess which is which well … Continue reading
Posted in Fund management in general, R language
Tagged ARORA, financial Turing test, technical analysis
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Backtesting — almost wordless
On Tuesday I gave a talk at the Thalesians entitled “Effective backtesting”. You can get the annotated slides but below is an almost wordless introduction to backtesting. Introduction Figure 1. When you backtest, you attempt to see how an investment strategy would have worked during some historical period of time. We can think of backtesting … Continue reading
Posted in almost wordless, Quant finance, Random portfolios
Tagged backtesting, outperformance
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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
