“The earliest known work in Arabic arithmetic was written by alKhowarizmi, a mathematician who lived around 825, some four hundred years before Fibonacci. Although few beneficiaries of his work are likely to have heard of him, most of us know of him indirectly. Try saying “alKhowarizmi” fast. That’s where we get the word “algorithm,” which means rules for computing.”
“The March 16 stock crash was part of a broader liquidity crisis that pummeled even seemingly safe bonds, threatening the viability of companies and municipalities across America. Only action from the Federal Reserve brought things back from the brink.”
I am very proud to be a member of Heterodox Academy. Heterodox Academy is a politically diverse group of more than 2,000 professors and graduate students who have come together to improve the quality of research and education in universities by increasing viewpoint diversity, mutual understanding, and constructive disagreement. HxA’s website is located at https://heterodoxacademy.org.
For a PDF version of the (gated) WSJ article linked below, see http://bit.ly/takeback_academia.
Quoting from this article, “From the era of railroads and the telegraph to that the internet and smartphones, the price charged by the finance industry to turn a dollar of savings into a dollar of investment has mostly remained between 1.5 cents and 2 cents for every dollar that passes through the finance industry.” See https://goo.gl/4fo7KD for PDF version of this gated article.
I highly recommend this Freakonomics podcast (and transcript) about passive versus actively managed investment strategies. It provides historical context for the development of some of the most important ideas in finance (e.g., the efficient market hypothesis) and the implications of these ideas for investing in the long run. Along the way, you get to “virtually” meet with many of the best, brightest and most influential academic and professional finance thinkers who played important roles in shaping this history.
Prior to listening to this podcast, I was not aware of how a quip in a 1974 Journal of Portfolio Management article authored by the MIT economist Paul Samuelson inspired Vanguard founder Jack Bogle to launch the world’s first index fund in late 1975. Samuelson suggested that, “at the least, some large foundation should set up an in-house portfolio that tracks the S&P 500 Index — if only for the purpose of setting up a naive model against which their in-house gunslingers can measure their prowess.” (source: “Challenge to Judgment”, available from http://www.iijournals.com/doi/abs/10.3905/jpm.1974.408496).
It’s hard enough to save for a house, tuition, or retirement. So why are we willing to pay big fees for subpar investment returns? Enter the low-cost index fund.
From page 1 of today’s Wall Street Journal – how automation is increasingly (and in many cases, adversely) affecting the livelihoods of financial advisors.
Services that use algorithms to generate investment advice, deliver it online and charge low fees are pressuring the traditional advisory business. The shift has big implications for financial firms that count on advice as a source of stable profits, as well as for rivals trying to build new businesses at lower prices. It also could mean millions in annual savings for consumers and could expand the overall market for advice.
Wonderful explanation of the logical fallacy associated with dismissing theories based upon modeling assumptions that are not literally true… HT to Scott Cunningham.
In Zoolander, the titular character is presented with a model of a building. He inspects the model and responds with anger and indignation:
Derek Zoolander: What is this? [smashes the model for the reading center] A center for ants?
Derek Zoolander: How can we be expected to teach children to learn how to read… if they can’t even fit inside the building?