Mandelbrot Interview

FT.com / FT Markets News-GREAT! Interview with Benoit Madelbrot. HIGHLY Recommended. Required for my classes. On Market efficiency, non normality, history of finance, and price dicontinuities. Fascinating. Video is here.HT to pkedrosky

Neuroeconomics from MIT

Neuroeconomics | MIT World: "Drazen Prelec peers into the human brain while it makes decisions. In his corner of the new field of neuroeconomics, Prelec uses a functional magnetic resonance imaging (fMRI) machine to scan minds pondering the pros and cons of purchasing and selling products like Godiva chocolate and flash drives.Prelec first provides a brief background on the emergence of his

The Exiled Victims of Bernie Madoff - Money 2009 -- New York Magazine

The Exiled Victims of Bernie Madoff - Money 2009 -- New York Magazine: "For most of us, the Madoff matter is over. The man is in jail for the rest of his life, his associates have lawyered up, his wife is a pariah. But for those victimized by Madoff, the story is just beginning. There are several kinds of Madoff victims, of course. Some are wealthy beyond imagination and hardly affected at all.

FT.com / In depth - How to tame the animal spirits

FT.com / In depth - How to tame the animal spirits: "...policymakers have recognised that the financial system cannot continue to operate as an off-balance-sheet liability of the public sector, leaving the taxpayer to bear the cost of the clean-up after any catastrophe.....President Barack Obama declared in June that its “proposals would compel these firms to internalise the costs they could

Does the Incentive Effect of the Charitable Deduction Vary Across Charities? by Robert Yetman, Michelle Yetman

SSRN-Does the Incentive Effect of the Charitable Deduction Vary Across Charities? by Robert Yetman, Michelle Yetman: "We find significant differences in the response of donations to taxes across different types of charities. Donations to charities that provide basic goods and services to humans in need appear to be unresponsive to tax incentives, while donations to charities that appeal to higher

DNA-Based Investing Strategies - Barrons.com

DNA-Based Investing Strategies - Barrons.com: "Science can tell the difference between nature and nurture. Personal investing strategies are based on genes, brain patterns, and human experience. Columnist Jason Zweig goes to the University of Pittsburgh to uncover whether science can tell whether he is more guided by his nature, or by his life."

Men, Women and Money | Psychology Today

Men, Women and Money | Psychology Today: "For most people, money is never just money, a tool to accomplish some of life's goals. It is love, power, happiness, security, control, dependency, independence, freedom and more. Money is so loaded a symbol that to unload it--and I believe it must be unloaded to live in a fully rational and balanced relationship to money--reaches deep into the human

Been gone for a while

As many of you know, I have been gone for a week, so I will post a few things today that are rather old but have been wanting to comment on.First is this piece by George Will. Free trade is good and that things such as tariffs hurt the majority of people involved. George F. Will - Obama's Tire Tariff May Protect Unions but Harms the Nation - washingtonpost.com: "The 215 percent increase in tire

Cramer Freaks Out On The SEC Over Flash Trading (VIDEO)

Cramer Freaks Out On The SEC Over Flash Trading (VIDEO): "This time he comes down on the Securities and Exchange Commission's (SEC) flash trading crackdown, and makes a lot of sense.

Why the sudden interest in flash trading when the SEC continues to overlook so many much larger problems?

The powerful and mysterious brain circuitry that makes us love Google, Twitter, and texting. - By Emily Yoffe - Slate Magazine

The powerful and mysterious brain circuitry that makes us love Google, Twitter, and texting. - By Emily Yoffe - Slate Magazine: "It is an emotional state Panksepp tried many names for: curiosity, interest, foraging, anticipation, craving, expectancy. He finally settled on seeking. Panksepp has spent decades mapping the emotional systems of the brain he believes are shared by all mammals, and he

Drilling Down - Perceiving the Risk of Stock Picking - NYTimes.com

Drilling Down - Perceiving the Risk of Stock Picking - NYTimes.com: "Consider a stock that picks up 10 cents on even days of the month and loses that much on odd days. Now imagine, instead, a stock that picks up value until the midpoint of the month, and then sinks until the endpoint. Both stocks offer the same monthly and yearly return. But investors will tend to regard the first stock as safer

Kodak and KKR: Distressed Debt Investing 101 - Deal Journal - WSJ

Kodak and KKR: Distressed Debt Investing 101 - Deal Journal - WSJ: "KKR will buy up senior secured notes carrying interest rates as high has 10.5%, which is twice the blended interest rate that Kodak is paying on its current debtload. The firm will also receive warrants to convert the debt into 53 million Kodak shares.....KKR is essentially acting as a lender of last resort, while gaining the

Insider trading? Possibly

While the deal had been rumored, trading like this is at least suggestive of insider trading. Deal Journal - WSJ: "...it looks like somebody couldn’t keep quiet about the Perot deal, though it had been rumored to be in the works for many months. Dow Jones Newswires reports that starting Sept. 9 and continuing through Monday, traders bought and sold far more options in Perot Systems than they

Problems managing money may foreshadow Alzheimer's - Yahoo! News

Uh, so wait. While I doubt VERY strongly there is any causation here, I would suggest that you want to do your finance readings since you never know.Problems managing money may foreshadow Alzheimer's - Yahoo! News: "Problems with basic money management may serve as a sign that an older adult with mild memory impairment will soon progress to Alzheimer's disease, researchers reported Monday."

Using options as tools for hedging, 4 techniques available to anybody

Basic, but good intro! using options as tools for hedging, 4 techniques available to anybody:"Another reason to desire a hedge on a long position would be that you believe the market is going to correct, and stocks you own are going to go lower with it, but you still believe that in time the names you hold can move higher. A hedge can temper the short-term pain or even provide profts you can

Unpaid bills mount for top Chrysler executive - Yahoo! News

Unpaid bills mount for top Chrysler executive - Yahoo! News: "One of the best-known auto industry executives in the world has fallen on hard times.Jim Press, who briefly ran Toyota Motor Corp.'s U.S. operations and spent 37 years with the Japanese automaker before joining Chrysler as one of its three top executives in 2007, is facing claims of more than $1.35 million for unpaid federal taxes and

Fed Rejects Geithner Request for Study of Governance, Structure - Bloomberg.com

Well, then, this is heating up. Stay tuned, I doubt we have seen the end of this one.Fed Rejects Geithner Request for Study of Governance, Structure - Bloomberg.com: "The Federal Reserve Board has rejected a request by U.S. Treasury Secretary Timothy Geithner for a public review of the central bank’s structure and governance, three people familiar with the matter said.The Obama administration

The Financial Crisis and America’s Casino Culture - NYTimes.com

Interesting. The Financial Crisis and America’s Casino Culture - NYTimes.com: "“It goes all the way back to George Washington,” said Robert Shiller, the Yale economist who warned of the Internet and real estate bubbles, and whose book, “Irrational Exuberance,” remains a seminal text on Americans’ tendency to believe in good times. “Washington said regulation should be done with a light hand. The

Case study on paying off loans

Hat's off to the Hildebrandts. A good case study for personal finance!Yahoo! Finance - Business Finance, Stock Market, Quotes, News: "Five years ago, the Hildebrandt family of New Richmond, Wis., was juggling more than $100,000 in credit card and personal debt. Through frugality, determination and hard work, they are now -- other than a mortgage -- debt-free."The secret? Hard work, will power,

Did Wells Fargo's Auditors Miss Repurchase Risk? (WFC)

This is a good example of what you can sometimes unearth if you dive a little deeper than normal.Did Wells Fargo's Auditors Miss Repurchase Risk? (WFC): "On Friday, Clusterstock worried that Wells Fargo may be making the same fatal mistake AIG did – underestimating, or worse, naively ignoring Collateral Call Risk."

SEC’s Schapiro Sees More Public Disclosure for Hedge Funds - Bloomberg.com

This has been a major issue since I began teaching. Will be interesting to see if it happens whether hedge funds flee the country as some have threatened in the past.SEC’s Schapiro Sees More Public Disclosure for Hedge Funds - Bloomberg.com: "The U.S. Securities and Exchange Commission will urge more public disclosure from hedge funds if Congress follows through with plans to make the investment

The secret of self-control : The New Yorker

Patience is a virtue: Behavioral finance time anyone?The secret of self-control : The New Yorker: "Once Mischel began analyzing the results, he noticed that low delayers, the children who rang the bell quickly, seemed more likely to have behavioral problems, both in school and at home. They got lower S.A.T. scores. They struggled in stressful situations, often had trouble paying attention, and

S&P 500 Winners & Losers Since Lehman's Fall - CNBC By The Numbers - CNBC.com

S&P 500 Winners & Losers Since Lehman's Fall - CNBC By The Numbers - CNBC.com: "According to data compiled by CNBC, 412 companies in the U.S. equity index are trading in negative territory, with an average loss of 22%, since the date that Lehman's demise took effect. As no surprise, many financial companies are among the worst performers from a year ago"

10 Ways Sports Stars Destroy Their Finances

Clusterstocks' Business Insider's 10 Ways Sports Stars Destroy Their Finances: "A Sports Illustrated article this year showed how shockingly common financial ruin is: * By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress...... * Within five years of retirement, an estimated 60% of former NBA players are broke. * Numerous

How economists are tackling sports injuries

FT.com / Reportage - How economists are tackling sports injuries: "Brady’s story shows vividly how injury can affect a team, and in particular injury to a star player, whose performance is doubly critical. And since sport is increasingly obsessed by Freakonomics-style analysis, where economists and statisticians (and mere stats nuts) hunt for inefficiencies in the system, his case raises

Psychology of poverty and temptation – Chris Blattman

Psychology of poverty and temptation – Chris Blattman: "Some people are not only impulsive and impatient, but inconsistently so. they care a lot about a dollar today versus tomorrow, but could care less between getting a dollar either 10 or 11 days from now. Economists call this ‘hyperbolic discounting’.Both behaviors–impatience and time inconsistency–could be a source of persistent poverty.Or

SSRN-The Liquidity of Liquid Markets During the Financial Crisis by Craig Furfine

SSRN-The Liquidity of Liquid Markets During the Financial Crisis by Craig Furfine: "We measure changes to trading volumes, spreads, the level and shape of order books, and the price impact of a trade and document that these traditional measures imply a noticeable withdrawal of liquidity from Eurodollar futures markets, which previously could have been argued to be one of the most liquid financial

Is this common?

Was reading over the announcement and must confess I do not know if this is common or not: Anyone help me here?From Kodak's 8k announcing a new convertible sale:"Information Rights: For so long as KKR and certain related parties hold at least 10% of the common stock issued or issuable upon exercise of the Warrants it originally purchased pursuant to the Purchase Agreement, KKR shall have the

To Reduce Hedge Fund Risk, Let Everyone In - News Analysis - NYTimes.com

Steven M. Davidoff - To Reduce Hedge Fund Risk, Let Everyone In - News Analysis - NYTimes.com: "It is time to get serious about hedge fund risk. This, however, is not the usual argument for more regulation of hedge funds. Here is a contrarian view: the best course for our capital markets may actually be in the other direction. Perhaps hedge funds need to be deregulated, breaking down the wall

SU - Former Cub Shawon Dunston Demands Team Pay Him Promised College Money - The Two-Way - Breaking News, Analysis Blog : NPR

SU - Former Cub Shawon Dunston Demands Team Pay Him Promised College Money - The Two-Way - Breaking News, Analysis Blog : NPR: "Shawon Dunston, the former Chicago Cubs all-star shortstop, has offered an interesting reason why the Tribune Co. now in bankruptcy court, shouldn't be allowed by the judge to sell his old team: it still owes him scholarship money he was promised so that he could obtain

SSRN-Understanding the Growth of African Financial Markets by Mihasonirina Andrianaivo, Charles Amo Yartey

SSRN-Understanding the Growth of African Financial Markets by Mihasonirina Andrianaivo, Charles Amo Yartey: "This paper examines empirically the determinants of financial market development in Africa with an emphasis on banking systems and stock markets. The results show that income level, creditor rights protection, financial repression, and political risk are the main determinants of banking

SSRN-From Behavioural to Emotional Corporate Finance: A New Research Direction by Richard Fairchild

Interesting: breaking behavioral finance down into finer groupings.SSRN-From Behavioural to Emotional Corporate Finance: A New Research Direction by Richard Fairchild: "Behavioural finance and behavioural corporate finance analyses the effects of psychological biases, heuristics, and emotions on investors’ and managers’ decision-making and performance. Taffler and Tuckett (2005) have introduced a

SSRN-The Efficacy of Short Selling Restrictions: Evidences from Italy in Post-Lehman Turmoil by Gianluca Mattarocci, Gabriele Sampagnaro

More evidence, this time from Italy, that last year's short selling bans did not achieve their desired reductions in volatility. SSRN-The Efficacy of Short Selling Restrictions: Evidences from Italy in Post-Lehman Turmoil by Gianluca Mattarocci, Gabriele Sampagnaro: "By analyzing the effect on daily price returns and volatility following the addition of short selling constrains, and using some

Survivor Bias on the Gridiron - Freakonomics Blog - NYTimes.com

Dubner brilliantly writes on the Survivorship Bias using sports as the example. It is good and thus I will include even though he has to bring up the Bills losing AGAIN.Survivor Bias on the Gridiron - Freakonomics Blog - NYTimes.com: "Over time, therefore, the DJIA reflects a different reality than many people presume. It is biased toward survivors — or, if you want to think of the concept more

Economist Zvi Bodie debunks standard investment advice - Sep. 16, 2009

Bodie has long advocated holding treasuries (technically TIPS) and if you really want to take risk using long term options).Economist Zvi Bodie debunks standard investment advice - Sep. 16, 2009: "Were retirement investors taking on too much risk before the crash?Yes. The standard models that are used to give investment advice to millions of Americans are fundamentally wrong. We're told that over

Stress Taints Decision Logic | Psych Central News

Stress Taints Decision Logic | Psych Central News: "Typically, we reflect on our past history to weigh the pros and cons of a choice, and then decide on the most logical option.A new study suggests this approach may need revision if we are under cognitive stress — the stress can serve as a distracting force and cause us to make poor decisions....The authors note that when we are stressed and need

Are hockey fans, scalpers ready for 'dynamic' ticket prices? - Puck Daddy - NHL - Yahoo! Sports

I always like it when economics wins out! This is a perfect example of something many have been advocating for years:Are hockey fans, scalpers ready for 'dynamic' ticket prices? - Puck Daddy - NHL - Yahoo! Sports: "This season, the Dallas Stars are the first NHL team to implement a system called 'dynamic pricing,' which is like variable pricing only it's determined with artificial intelligence

Guest Lecture by David Swensen Yale's Chief Investment Officer

In the week that Yale reported a 30% loss of their endowment, I thought it would be interesting to look at this guest lecture from David Swensen. It is unfortunate in a way that they lost so much, since his presentation and long run record had been very good. Indeed, Swensen has done very well over longer term windows:"The Yale endowment is led by David F. Swensen, who has advocated aggressive

YouTube - Authors@Google: Jeffrey Kluger

YouTube - Authors@Google: Jeffrey Kluger I am almost done with his book Simplexity.His discussions of traffic or escaping a disasters are fascinating and his whole work is a good reminder that few things are strictly linear.

The Greatest Sucker's Rally In History, Play By Play

How closely does history repeat itself?From the Business Insider at ClusterStock: The Greatest Sucker's Rally In History, Play By Play: "The early 1930 rally came after the market had fallen nearly 50% in the fall of 1929. That rally took the market up nearly 50% again, to a level that was only about 20% below the previous peak.That rally, of course, was also the biggest sucker's rally in

Which CEOs Took a Base Pay Cut? :: The Daily Stat :: September 15, 2009 :: HarvardBusiness.org

Which CEOs Took a Base Pay Cut? :: The Daily Stat :: September 15, 2009 :: HarvardBusiness.org: "373 U.S. public companies reduced their chief executives' base salaries between June 1, 2008 and June 18, 2009. 68 companies in the Fortune 1000 index have reduced executive officers' base salaries in the past year."I am sort of disappointed but not sure why. I would have figured almost all did.

Wall Street’s Math Wizards Forgot a Few Variables - DealBook Blog - NYTimes.com

A look back by the NY Times at what went wrong:Wall Street’s Math Wizards Forgot a Few Variables - DealBook Blog - NYTimes.com: "What wasn’t recognized was the importance of a different species of risk — liquidity risk,” Stephen Figlewski, a professor of finance at the Leonard N. Stern School of Business at New York University, told The Times. “When trust in counterparties is lost, and markets

Simon Johnson and James Kwak - Lehman Brothers and the Persistence of Moral Hazard - washingtonpost.com

Simon Johnson and James Kwak - Lehman Brothers and the Persistence of Moral Hazard - washingtonpost.com: "Moral hazard already existed in the system on at least three levels.First, bank employees and managers had asymmetric compensation structures.....Second, shareholders had the same payoff structure. Banks are highly leveraged institutions; every dollar contributed by shareholders is magnified

5 lessons on how to strengthen finances and limit damage in next crisis | Ecommerce Journal-more about virtual economy|e-commerce and money news|articles|forex and stocks news|banks|investment|gambling

5 lessons on how to strengthen finances and limit damage in next crisis | Ecommerce Journal-more about virtual economy|e-commerce and money news|articles|forex and stocks news|banks|investment|gambling: "The real problem with asset allocation isn't that it no longer works, but that people expect that it will always work. And that's just not true. The 2000-02 bear showed that even sophisticated

FinanceProfessor and SBU in the Globeandmail.com: September rally like white shoes after Labour Day

Globeandmail.com: September rally like white shoes after Labour Day: "Like everyone else, investors 'give in to mood swings that lead to impulsive decisions,' says Jim Mahar, an associate finance professor at St. Bonaventure University in upstate New York. And it's why, despite our better judgment, we are still tempted to try to time the market and latch on to hot stocks, funds and trends.'The

Motives and Consequences Of Financial Regulation

The short version is that regulation often helps the Regulated and harms the poor. The Harvard Law School Forum on Corporate Governance and Financial Regulation » Motives and Consequences Of Financial Regulation:Fascinating piece that provides evidence of what we probably already knew: regulations can often hurt those they are designed to help. How? By preventing them access to markets and by

Might the rating agencies be in more trouble than originally thought?

The other day I mentioned this interview with Terry McGraw of McGraw-Hill who basically said that Moody's merely had it wrong and there was no fraud.

In this response, David Eihorn suggests that this "we messed up" defense may not be enough. Now that said, he is short the stocks of rating agencies so it is ironic that he is speaking on conflicts of interest, but it does bring up some serious

Kahneman speaking at Georgetown graduation

Daniel Kahneman is one of the main founders of the Behavioral Economics/Finance School. This is a short (19 min if you watch it all) graduation address that we used in class (Behavioral Finance). I recommend skipping the first section and get right to his talk on economic rationality.

In defense of markets---Thomas E. Woods, Jr. - Mises Institute

I have not mentioned the Mises Institute in a while. But this response is so thorough and so well thought out that I had to. It is a response piece to a person who does not favor free market responses. Thus, Mises plays the role of free market defender. It is a role that is played very well!Anatomy of an Economic Ignoramus - Thomas E. Woods, Jr. - Mises Institute: "...no free-market economist

Paul B. Farrell: Lazy Portfolios take on the best and win, again - MarketWatch

Have you heard of the Lazy Portfolios? They run a series of tests of what are essentially passive investment strategies vs active management. Well given behavioral finance is so hot, they decided to take on that. The result? Lazy wins again!Paul B. Farrell: Lazy Portfolios take on the best and win, again - MarketWatch: "Does the 'Behavioral Edge ... earn superior returns?' No!Representing

Investment Mistakes: The View From Behavioral Finance - WSJ.com

Investment Mistakes: The View From Behavioral Finance - WSJ.com: "Why did we think and feel and behave as we did? Why did we act in a way that today, in hindsight, seems so obviously stupid? Only by understanding the answer to these questions can we begin to improve our financial future.This is where behavioral finance comes in. Most investors are intelligent people, neither irrational nor insane

McGraw Hill CEO: We Just Got It Wrong

From CNBC and Clusterstock: This was one of the more interesting CNBC interviews I have seen in a long time. The interview is with McGraw-Hill CEO Terry McGraw. In the interview Mr McGraw starts off talking about new tools for college classrooms but then it gets more exciting and he discusses the recent case in which a judge allowed rating agencies to be sued. McGraw stresses that there was

SSRN-Governance Matters VIII: Aggregate and Individual Governance Indicators, 1996-2008 by Daniel Kaufmann, Aart Kraay, Massimo Mastruzzi

Yes this will be used in class :)SSRN-Governance Matters VIII: Aggregate and Individual Governance Indicators, 1996-2008 by Daniel Kaufmann, Aart Kraay, Massimo Mastruzzi: "Abstract: This paper reports on the 2009 update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2008: Voice

SSRN-Short Sales, Limits to Arbitrage and Fundamental Value by Dirk Brounen, Melissa Porras Prado, Marno Verbeek

Score another for short sales!SSRN-Short Sales, Limits to Arbitrage and Fundamental Value by Dirk Brounen, Melissa Porras Prado, Marno Verbeek: "The presence of short sale constraints ensures that pessimistic investors' negative information is not reflected in the stock price as they are not able to sell short, short sales hamper the tendency of the optimist to bid up prices."

Rating agencies lose free-speech claim | Reuters

Rating agencies lose free-speech claim | Reuters: "'You can't yell fire in a crowded theater, but here it seems the agencies were doing the opposite,' said Jonathan Macey, a professor at Yale Law School. 'There was a fire, but they were saying there was nothing to worry about and taking money for saying that.'"

Football, Statistics, and Agency Problems « The Baseline Scenario

Agency costs occur when the agent looks out for his or her own interests and not those of whom hired him/her. The typical example of this is when manager looks out for his/her personal pay and not the returns of the shareholders. That said the world is full of examples of such conflicts. The Baseline Scenario provides a wonderful example using football. Specifically, the fact that football

Forbes: Bills lead league in value increase : Sports : The Buffalo News

Forbes: Bills lead league in value increase : Sports : The Buffalo News: "Forbes magazine has released its annual rankings of NFL franchises and their worth. The Bills are valued at $909 million, 26th in the league overall. They were 27th last season.Buffalo is one of four teams, with New England, Tampa Bay, San Diego, whose value is up 3 percent from 2008....The Dallas Cowboys are worth $1.65

SSRN-Capital Structure Decisions Around the World: Which Factors are Reliably Important? by Özde Öztekin

SSRN-Capital Structure Decisions Around the World: Which Factors are Reliably Important? by Özde Öztekin: "The most reliable determinants are past leverage, tangibility, firm size, research and development, depreciation expenses, industry median leverage, and liquidity. The signs of the reliable determinants give consistent support to the dynamic trade off theory."This one will definitely be

SSRN-CFOs and CEOs: Who Have the Most Influence on Earnings Management? by John (Xuefeng) Jiang, Kathy Petroni, Isabel Wang

SSRN-CFOs and CEOs: Who Have the Most Influence on Earnings Management? by John (Xuefeng) Jiang, Kathy Petroni, Isabel Wang: "Because CFOs’ primary responsibility is financial reporting, CFO incentives should play a stronger role than those of the CEO. We find that the magnitude of accruals and the likelihood of beating analyst forecasts are more sensitive to CFO equity incentives than to those

Tweets of the week

Have not done this in a while, but since class just started I figured I would point out some really cool tweets of note. Not very diversified today, but ran out of time and the transaction costs of diversification were too high.From Wayne Marr[Harvard HBS, BA680] How Marvel Went from Bankruptcy to $4B Buyout http://tinyurl.com/msr563[SSRN] CFOs and CEOs: Who have the most Influence on earnings

We're All Predictably Irrational - Dan Ariely

YouTube - We're All Predictably Irrational - Dan Ariely: "Dan Ariely, a professor of behavioral economics at Duke University, presents examples of cognitive illusions that help illustrate why humans make predictably irrational decisions."Just used this in class. It is excellent!

How to Lose $3 Million in Six Years - Yahoo! Buzz

The Buzz Log - How to Lose $3 Million in Six Years - Yahoo! Buzz:"Callie Rogers was just 16 when she won a whopping $3 million in the lottery. Six years later, she reports that she blew untold sums on drugs, partying, exotic cars, and breast implants. A staggering $730,000 went to designer clothes alone, Ms. Rogers explains in an article from AOL. Says Rogers: 'I honestly wish I'd never won the