Wednesday, November 26, 2014

Automation Makes Us Dumb - WSJ

Automation Makes Us Dumb - WSJ: The limits and limitations of automation.



"When system designers begin a project, they first consider the capabilities of computers, with an eye toward delegating as much of the work as possible to the software. The human operator is assigned whatever is left over, which usually consists of relatively passive chores such as entering data, following templates and monitoring displays."


Finding a new role for the human.

Monday, November 24, 2014

The truth about UK living standards since the crisis - FT.com

The truth about UK living standards since the crisis - FT.com:



An analysis of UK income statistics.



"Come next year’s UK election, bread and butter issues of living standards will displace Europe and immigration from the top of the public debate. The problem is that there are so many different comparisons and data sources that many contradictory claims are true. Few will be both true and fair. Here, then, is a guide to British living standards since the crisis, which avoids cherry-picking data and the cop out of saying that results are all too uncertain and complicated to conclude anything"


One additional area of interest is the contrast between the UK, the US and the Euro area.  The UK has had a fall in real wages and relatively healthy employment growth. For the US, though the economy has been stronger overall, employment and wages have been higher.  I need to look at the Euro area to complete the picture.

Sunday, November 16, 2014

Self-opinion and forecasting

Why we are unaware that we lack the skill to tell how unskilled and unaware we are:


"Dunning and Ehrlinger knew that most college students tend to hold very high opinions of themselves when it comes to abstract reasoning. It’s part of what they call a “chronic self view.” You have an idea of who you are in your mind, and it is kind of like a character in a story, the protagonist in the tale of your life. Some aspects of that character are chronic, traits that are always there that you feel are essential and evident, beliefs about your level of skill that are consistent across all situations. For most college students, being great at abstract reasoning is one of those traits, but being great at computer programming is not."


There is an experiment here that can be conducted with economic or financial forecasting.  How well do people forecast and how accurate do they think that they will be?

Saturday, November 15, 2014

Oranges and lemons — the FX scandal in perspective — Bull Market — Medium

The WM benchmark fix.  Oranges and lemons — the FX scandal in perspective — Bull Market — Medium:



"The FX settlement was announced this week, prompting a lot of editorialising about how the banks Don’t Get It, and Are Systematically Corrupt and so on. To an extent this is the default position post LIBOR, post CDO and rightly so. But I think there’s a danger in viewing everything through the prism of previous scandals. Although there was some behaviour that was clearly on the other side of the line, the regulators also made clear that lots of the practices involved were not intrinsically criminal; this was an investigation into a grey area, not a straightforward case of lying. Of course, the industry has less than zero claim to the benefit of anyone’s doubt, and people will be instantly suspicious of claims that “it’s more complicated than that”, so maybe I can explain what went on in the FX market through the medium of a series of examples, all based on someone going down to market to buy oranges."


'via Blog this'

Friday, November 14, 2014

Trading as gambling

Management Science: INFORMS: "This paper offers evidence from three different samples consistent with investors substituting between playing the lottery and gambling in financial markets. In the United States, increases in the jackpots of the multistate lotteries Powerball and Mega Millions are associated with significant reductions in small trade participation in the stock market. California-based discount brokerage clients and German discount brokerage clients are significantly less likely to trade during weeks with larger lottery prizes in the California and German lotteries, respectively. Variation in lottery prizes affects speculative trading in more lottery-like securities such as individual stocks and options, but not trading in bonds and mutual funds. Trading that is likely associated with long-term savings motives, such as trading in retirement accounts, does not respond to lottery jackpots, either. The negative relation between trading activity and jackpots is stronger for individuals who are more likely to play the lottery."



'via Blog this'

. . . and the Cross-Section of Expected Returns

. . . and the Cross-Section of Expected Returns: "Hundreds of papers and hundreds of factors attempt to explain the cross-section of expected returns. Given this extensive data mining, it does not make any economic or statistical sense to use the usual significance criteria for a newly discovered factor, e.g., a t-ratio greater than 2.0. However, what hurdle should be used for current research? Our paper introduces a multiple testing framework and provides a time series of historical significance cutoffs from the first empirical tests in 1967 to today. Our new method allows for correlation among the tests as well as missing data. We also project forward 20 years assuming the rate of factor production remains similar to the experience of the last few years. The estimation of our model suggests that a newly discovered factor needs to clear a much higher hurdle, with a t-ratio greater than 3.0. Echoing a recent disturbing conclusion in the medical literature, we argue that most claimed research findings in financial economics are likely false."



'via Blog this'

Thursday, November 13, 2014

The productivity of PhDs: Lazy graduate students? | The Economist

The productivity of PhDs: Lazy graduate students? | The Economist: "But the vast majority of PhD students, even at top universities, produce nowhere near that much (see chart). The number of AER-equivalent papers of the median PhD student, six years after graduation, is below 0.2 for all universities. Yes, all—even Harvard, MIT and Chicago. The 50th percentile at almost all universities has a score of 0.1. That’s equivalent to publishing one paper in a second-tier field journal over six years. "