Comments on: Wall Street Cheat Sheet

By: Groty

Groty — Wed, 08 Jul 2009 13:40:49 +0000

“The sweater” makes a comeback in the dog days of summer!!

By: jonpublic

jonpublic — Wed, 08 Jul 2009 03:26:34 +0000

Your picture needs a caption, like “I am serious picture, the big.” or some other LOL cat quote.

By: Zed

Zed — Wed, 08 Jul 2009 02:35:12 +0000

Barry, is that your Blue Steel?

By: mickslam

mickslam — Wed, 08 Jul 2009 02:03:12 +0000

The Subpop of the economics world! That is a very high complement.

Interesting that you use a factor model approach. Factor models when used correctly (basically managing less than a few billion) are incredible.

willid3:

The equation for sampling with replacement is the basis of all intelligent risk management. Most people do not understand this, so risk way, way, way too much or look at entirely inappropriate metrics, like VAR. Vary the success ratio until you reach historical lows or highs and you will have a good, but not exact, idea of the risk you are facing. Stress test with crazy numbers, and you will get your max risk over a 20 year trading period. Basically, sampling with replacement will tell you how bad it is likely to get over the next X trades, given your assumptions. The assumptions are simple enough to be “played with” and intuitively known.

Winning streaks and losing “streaks” are far more common than people expect. So many of the best traders in the world were gambling statistics freaks – who use this equation constantly in one form or another.

By: Mike in Nola

Mike in Nola — Wed, 08 Jul 2009 00:42:38 +0000

Bailing out into Poly Sci? What a wimp.

By: alfred e

alfred e — Tue, 07 Jul 2009 23:42:27 +0000

@Fredex: Had fortten about George Box’s classic statement. Seems relevant.

@Wally: Wow! I guess this is the math stream. So how many people exactly remember Box and Godel?

By: wally

wally — Tue, 07 Jul 2009 23:36:56 +0000

“Anytime you are going to attempt to depict reality with a mathematical construct, the model will never be precise.”

The name Kurt Godel comes to mind here.

By: willid3

willid3 — Tue, 07 Jul 2009 23:09:54 +0000

comment on statistics
http://baselinescenario.com/2009/06/30/statistics-and-basketball-for-beginners/

By: adeev

adeev — Tue, 07 Jul 2009 23:05:49 +0000

“Anytime you are going to attempt to depict reality with a mathematical construct, the model will never be precise. ”

I think you meant “human behavior” instead of reality because Newtonian and quantum mechanics,for example, quite accurately depict reality.

~~~

BR: Excellent point!

I was being imprecise with my language, in referring to markets and the economy as reality

By: willid3

willid3 — Tue, 07 Jul 2009 22:37:50 +0000

BR, you observation about how prices deflate as you produce more of a good, is true of more than just technology (though it sure easier to see). it applies to just about any manufactured good. and models based on math (and computers) are always as good as those who picked the variables. and how they used them. and how they viewed the world too i would guess. and especially how their bosses do!!