Weekend's reads on trading, modeling, who to listen to and the morality of it all. Keep in touch with me through Twitter, Facebook, email, paper.li.
TRADING & MARKETS
The Financial Market as a Vengeful God – mainly macro
If you cannot be a priest yourself, you can always set up as an advisor, who will tell people which priests have a better line to the financial market god.
Best Stock Market Forecasters? – CXO
Quite an interesting cross-sectional and multiperiod study shows that e.g. investment banking forecasts for one-month outperform other forecasters, while underperform for six-month forecasts
Centrally cleared derivatives: Clear and present danger – The Economist
The risk in clearing-houses: All clear? – The Economist
Clearing-houses are meant to solve problems in derivatives markets. They create them, too
For several years I have been pushing against all of the voices saying that it was essential that financial derivatives be banned or that their use be dramatically curtailed. It isn't that I think that derivatives are such a great thing. I do believe they contributed to the 2008 blowup. The problem is that they are so much a part of the system that to change their role and function would, undoubtedly, cause a bunch of bad things to happen.
When to leave insignificant effects in a model – The Analysis Factor
You may have noticed conflicting advice about whether to leave insignificant effects in a model or take them out in order to simplify the model.
Performance persistence in hedge funds – Sober Look
performance in a particular year is very much dependent on how that manager did the previous year… This is true for each year since 1997 and for all major strategies.
The correlation is non existent, except that you would have earned a 21% one-year return if you invested when GDP is less than zero percent. Second, the best time to invest is when unemployment is peaking and higher than trend. Study conducted by O’Shaughnessy Asset Management.
Replacing market indices – Portfolio Probe
If equity markets suddenly sprang into existence now, would we create market indices? I’m doubtful.
Betas of the low vol cohorts – Portfolio Probe
How did the constraints affect portfolio betas, and how did the betas change over time? (includes links to the previous parts)
Quants: The Alchemists of Wall Street – Youtube
A story about greed, fear and randomness from the insides of Wall Street, director Marije Meerman, research Gerko Wessel, VPRO Backlight 2010 (48min)
William D Cohan: Getting what should be public information about major Wall Street firms can be maddeningly difficult. Bloomberg News discovered this in its ultimately successful effort to get information on the $1.2 trillion in “secret loans” the Fed doled out during the financial crisis. And I’ve had no small experience of it myself.
Markets, Morality and Mathematics – Magic, Maths and Money
One of the key critics of Aquinas’ argument that a merchant could charge what heliked, providing the future was uncertain, was Pierre Jean Olivi, who was born near Béziers in Languedoc around 1248.
Creation myths – Magic, Maths and Money
There is currently a debate being carried out on the internet between Steve Keen and Paul Krugman on the nature of money. For those (like myself) who do not have a formal training in the discipline, economists will consider money to be either endogenous or exogenous to the economy.
Markets, Ethics and Mathematics - A Defence of Mathematics – mathfinance.cn
In the aftermath of the Credit Crisis it became popular to blame quants and mathematics for the Credit Crisis.
ASSET CLASS VIEWS
Deleveraging - Bad for equities but good for credit assets – Macronomics
Q1 Post Mortem Stunners: Full Year 2012 EPS Forecasts Are Down 2% YTD; Apple Represents 15% Of S&P Rise – ZH
…the 12% YTD growth in the S&P YTD has been entirely due to multiple expansion: consensus 2012 EPS has declined by 2% since the start of 2012. Couple of charts from Goldman’s Weekly Kickstart
…the 12% YTD growth in the S&P YTD has been entirely due to multiple expansion: consensus 2012 EPS has declined by 2% since the start of 2012. Couple of charts from Goldman’s Weekly Kickstart
Seven Observations about the Yen – Credit Writedowns