Friday, August 30, 2013

What's an indifference curve?

More class videos:  topic is "what is an indifference curve and how does it relate to diversification?"

What is a put?

Another derivatives video for my classes.  Today's topic: what is a put contract?

A NPV (Net Present Value) refresher

Here is a fast whiteboard video I made to remind my class what NPV is.  

Thursday, August 22, 2013

Derivative payoff Diagrams

Working to get ready for the new semester by making some videos in advance.  Here is an attempt using Educreations an online white board app.  Seems VERY easy to use/share.  This was very first attempt with zero script etc. 

Monday, August 19, 2013

Introduction to financial derivatives

We have a new video/class capture program that I was playing with today.  Can't quite figure out how to export to YouTube yet, but here is a link

Monday, August 12, 2013

Hedge Funds And S&P 500 Nearly Identical - Business Insider

Hedge Funds And S&P 500 Nearly Identical - Business Insider:

This one surprised me.  I was expecting the normal "Hedge funds don't outperform" article but this is much better.  It shows that hedge funds while not outperforming indexes, have (on average) had lower risks.

A look in:

" ...the path of achieving the 8.6% return would have been dramatically different between these two. The monthly return volatility for the S&P500 is nearly double that of the hedge fund index. And while the correlation between the two indices is almost 0.6, the beta of the hedge fund index has consistently been low - about 0.33 over the 20 year period."
I definitely recommend clicking through and seeing the charts.  They do tell a story that is often forgotten when only returns are considered.
Read more:

Maybe the "Chinese Wall" is not all that we have been led to believe?

With I.P.O.'s on the Rise, Analysts Get New Scrutiny -

In the years after the internet bubble, the so-called "Chinese Wall" keeping Analysts and sales people apart was strenthened.  The rationale for this was to reduce the conflicts of interest that arise if an analysts' rating influences whether the firm gets the business or not ("Hey we will rate you a buy if you are our client." ).

Well now the NY Times is suggesting that maybe this wall is not as secure as we had hoped/been lead to believe:

For years, stock analysts have been barred from pitching I.P.O. business.....Today, companies routinely interview analysts when selecting bankers to underwrite their I.P.O.’s. During these meetings, the analysts say, they increasingly feel pressure to say the right things to curry favor with a company’s management and owners. They also see themselves as participating in their banks’ efforts to win business, a potential breach of government regulations."

The article even quotes Jay Ritter (A professor I am convinced is a genius): "“The walls between research and banking can still be porous,” said Jay R. Ritter, a professor at the University of Florida who studies the I.P.O. market. “It doesn’t surprise me that there has perhaps been some backsliding.”"

Thursday, August 08, 2013

Why You Shouldn’t Trust Internet Comments | Science/AAAS | News

Why You Shouldn’t Trust Internet Comments | Science/AAAS | News:

In many areas the Wisdom of the crowds rules, but what is the crowd isn't as smart as we think?

 From Reddit:

"The “wisdom of crowds” has become a mantra of the Internet age. Need to choose a new vacuum cleaner? Check out the reviews on Amazon. Is that restaurant any good? See what Yelp has to say. But a new study suggests that such online scores don’t always reveal the best choice. A massive controlled experiment of Web users finds that such ratings are highly susceptible to irrational “herd behavior”—and that the herd can be manipulated."

Here is the abstract of the paper by  Muchnik, Aral, and Taylor. 

Sunday, August 04, 2013

Why do I care?

I posted this on Facebook and then decided it was enough finance related to post here as well.

Yes, it is their money (donated by Phil Knight). Yes, they can spend their money in anyway they see fit. No, they are not the only ones to go "overboard".

I concede my "overboard" tends to be significantly less than other people's "just right". And I even bet that the fancy "football complex" will help recruitment (opulence sells), but its almost mind boggling excess sends another message and frankly makes me feel at least a little guilty about liking college football (sports).

The worst thing is I don't know why I feel guilty. It's not the sports aspect; I would feel just as guilty if the building were a new School of Business/Science/Education/Hospital or orphanage. It is the excess.

And yet why? If they want to have a bonfire and burn their money, it is none of my business (ignoring money supply and pollution effects). So why do I care? Strike up another one to behavioral finance I guess.

Thursday, August 01, 2013

Stern Advice: Financial Advice That Is Popular -- and Wrong - Yahoo! Finance

Stern Advice: Financial Advice That Is Popular -- and Wrong - Yahoo! Finance:

"The problem is, a lot of that is bad advice. At best it fit a bygone era; at worst it was never right and is dangerous.

Here is a list of my least favorite financial chestnuts."