Thursday, July 29, 2010

Behavioral FInance

Wow. Summer is busy even after classes are over! I thought I'd have more time to post but, as usual, we can't get what we want... Anyway, this is an interesting article that appeared in the FT about a hedge fund that uses behavioral finance techniques to invest.

Personally, I believe that behavioral finance brings essential insights on how financial models should strive to incorporate the idiosyncracies of human behavior rather than to take the easy way out and assume that investors are perfectly rational. However, up to now at least, I think that behavioral finance is still at a point in which is more like a collection of results challenging the current paradigm ("mainstream" finance) but still not able to come up with a good alternative theory. I'm not sure it ever will given how "strange" human beings can be whenever money is involved (or generally).

Altogether the article is very interesting and contains a useful introduction to behavioral finance. The trading strategy looks interesting too! Here is the beginning:

Before you even started reading this article, it had already been electronically scanned and its language examined by dozens of computers at hedge funds and investment banks.

At MarketPsy Capital in Santa Monica, California, remote servers will have rated how positive or negative it is on the economy and checked for emotional content on thousands of companies. Finding nothing useful, the computers will then move on.

Saturday, July 3, 2010

If you can meet with Triumph and Disaster And treat those two impostors just the same;

Yesterday was a tough day to Brazil. We played beautifully in the first half, but failed miserably in the second, losing to the Dutch by 2-1. 

Today we have Argentina vs Germany, and Spain vs. Paraguay. Now that Brazil is out, I'm 150% behind Spain.

Tomorrow we have the 2010 Wimbledon final. In the tunnel that leads to Wimbledon's Centre Court, the players pass under two lines of poetry in Rudyard Kipling's ``If'' poem (the title of this post). Very inspiring for victories and defeats.

Here is the whole poem read by Roger Federer and Rafa Nadal: