Saturday, November 30, 2013

FIFA Seeding Explained

World Cup seeding: How to play the game:  Don't play Indonesia.  This will bring down the average points in a world cup year.

"Unfortunately for the orange hordes of Dutch fans, that is exactly what their team did in June 2013. If they hadn't played that game they would be one of the top seeds, not Switzerland, who played fewer friendlies than most teams in the final 12 months that counted towards World Cup qualifying ranking points."

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Thursday, November 28, 2013

Who needs machines anyway?

Nicholas Carr - The Atlantic: Assesses the implications of allowing machines to do more and more tasks.

"Who needs humans, anyway? That question, in one rhetorical form or another, comes up frequently in discussions of automation. If computers’ abilities are expanding so quickly and if people, by comparison, seem slow, clumsy, and error-prone, why not build immaculately self-contained systems that perform flawlessly without any human oversight or intervention? Why not take the human factor out of the equation? The technology theorist Kevin Kelly, commenting on the link between automation and pilot error, argued that the obvious solution is to develop an entirely autonomous autopilot: “Human pilots should not be flying planes in the long run.” The Silicon Valley venture capitalist Vinod Khosla recently suggested that health care will be much improved when medical software—which he has dubbed “Doctor Algorithm”—evolves from assisting primary-care physicians in making diagnoses to replacing the doctors entirely. The cure for imperfect automation is total automation."

The humans become the supervisors of the machines, but can they be ready to jump in if that is necessary/

Monday, November 25, 2013

Magnus Carlsen's Win in Chess

Magnus Carlsen's Win in Chess Championship Shows Powerful Role of Computers - "The last chess match to get as much publicity as Mr. Carlsen's triumph was the 1997 contest between then-champion Garry Kasparov and International Business Machines Corp.'s Deep Blue computer in New York City. Some observers saw that battle as a historic test for human intelligence. The outcome could be seen as an "early indication of how well our species might maintain its identity, let alone its superiority, in the years and centuries to come," wrote Steven Levy in a Newsweek cover story titled "The Brain's Last Stand.""

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Saturday, November 23, 2013

Felix Salmon - ETFs

Felix Salmon: demolishes the idea that not everyone can be passive.

"But the point at which passive investing becomes self-defeating is a bit like the point at which the gradient of the Laffer curve turns negative, and tax hikes cause revenue losses rather than revenue gains: both points are far beyond any state of the world that obtains in real-life America. Passive investors are still a minority of all stock-market investors — and, what’s more, they could easily become a majority without doing any harm to the markets’ price-discovery abilities. The only thing that matters is that there’s a reasonably large number of active marginal price-setters. Since there always will be a reasonably large number of active marginal price-setters, no one ever need fear that the rise of passive investing is going to become self-defeating."

and highlights the gains to be made from cheap and systematic investment.

Blame Rich, Overeducated Elites as Our Society Frays

Blame Rich, Overeducated Elites as Our Society Frays - Bloomberg: "A related sign is the overproduction of law degrees. From the mid-1970s to 2011, according to the American Bar Association, the number of lawyers tripled to 1.2 million from 400,000. Meanwhile, the population grew by only 45 percent. Economic Modeling Specialists Intl. recently estimated that twice as many law graduates pass the bar exam as there are job openings for them. In other words, every year U.S. law schools churn out about 25,000 “surplus” lawyers, many of whom are in debt. A large number of them go to law school with an ambition to enter politics someday."

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Tuesday, November 19, 2013

Premature evaluation: when local relationship banking attacks! | A Fistful Of Euros

Premature evaluation: when local relationship banking attacks! | A Fistful Of Euros: "Relationship banking is often seen as a good thing that we need more of, counterpoised to faceless trading-floor turbo-finance. But relationship banking was precisely what Anglo did. Anglo tended to keep clients for many years, to involve itself deeply in their businesses, and to go to extraordinary lengths to serve them. It would also take risks to win or retain them. Its unique selling point was that it would do anything to get your deal done, and it would do it quickly. They frequently closed property transactions up to a billion euros within the week. In exchange for this, its clients put up with interest rate spreads and fees that were much higher than its competitors’.

This raises a second point, which is that you know it’s a bubble when capital gains come in so fast that changing the interest rate is irrelevant.


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Sunday, November 17, 2013

A Talk With Lars Peter Hansen, Nobel Laureate -

A Talk With Lars Peter Hansen, Nobel Laureate - "Lars Peter Hansen, an economist at the University of Chicago, is one of three winners of this year’s Nobel Memorial Prize in Economic Science, along with Eugene F. Fama, a fellow professor at the University of Chicago, and Robert J. Shiller, a professor at Yale."

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Monday, November 11, 2013

House prices "bubbled" because Turgot's land beats Samuelson's "money"

Worthwhile Canadian Initiative: House prices "bubbled" because Turgot's land beats Samuelson's "money": "If I am right about this, the financial crisis was not caused by the bursting of a land bubble, because it wasn't a bubble. It was caused by the appearance of a "money" bubble. And the crisis will only end when Turgot's land once again replaces Samuelson's "money""

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Sunday, November 10, 2013

Angry Bear » Rational Vs Adaptive Exectations

Angry Bear » Rational Vs Adaptive Exectations: "I note that the assumption of naive expectations leads to the belief that there will be irrational speculative bubbles in which agents assume some asset price will increase because it has in the past. This is one of they key features of the data. It is possible to reconcile this witih the rational expectations assumption, because anything at all can be reconciled with the assumption (note I never assert that the rational expectations hypothesis is false since we all agree that there is no falsifiable rational expectations hypothesis)."

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Saturday, November 09, 2013

Poisson distribution and crisis

Create a model for financial crisis that is based on a Poisson distribution. The number of world financial shocks in a decade.  What is the distribution?  Does this change over time?  Use the Rogoff data.

Poisson distribution - Wikipedia, the free encyclopedia: "The distribution was first introduced by Siméon Denis Poisson (1781–1840) and published, together with his probability theory, in 1837 in his work Recherches sur la probabilité des jugements en matière criminelle et en matière civile (“Research on the Probability of Judgments in Criminal and Civil Matters”).[3] The work focused on certain random variables N that count, among other things, the number of discrete occurrences (sometimes called "events" or “arrivals”) that take place during a time-interval of given length. The result had been given previously by Abraham de Moivre (1711) in De Mensura Sortis seu; de Probabilitate Eventuum in Ludis a Casu Fortuito Pendentibus in Philosophical Transactions of the Royal Society, p. 219.[4]"

In this way there is a link to reliability engineering: what are the policy measures that make the system more or less stable?

There is a worked example on hurricanes here.


Tim Harford:Swallow your contempt – Wonga is the symptom, not the problem -

"No high-street bank comes close to this clarity, and an unauthorised overdraft may cost far more than the loan that prevents that overdraft. Outcompeted on convenience, on comprehensibility and perhaps even on price by the likes of Wonga, Britain’s banks should hang their heads in shame."

People who can borrow from conventional banks turn to Wonga because

  1. It is easy to understand what you pay back
  2. It is quick and impersonal
  3. They do not trust banks
(Student Project will at bank) 

Wednesday, November 06, 2013

The siren call of Microsoft Excel -

The siren call of Microsoft Excel - "“Reality is a crutch for people who can’t handle drugs,” proclaimed a sticker I once purchased in a suburban shopping centre. It fitted in perfectly with my collection of risqué buttons and key chains. As a teenager I had discovered accessorising was the easiest way to at least give the appearance of defying authority."

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Enron Emails and Central Bank policy

There are two posts here with Model Analysis of the Enron Email Corpus from Data and Analysis with R, for Fun (and Maybe Work!):   This could be useful to try to replicate with Bank of England MPC minutes or even the Fed or ECB press conference.

"Having only ever played with Latent Dirichlet Allocation using gensim in python, I was very interested to see a nice example of this kind of topic modelling in R.  Whenever I see a really cool analysis done, I get the urge to do it myself.  What better corpus to do topic modelling on than the Enron email dataset?!?!?  Let me tell you, this thing is a monster!  According to the website I got it from, it contains about 500k messages, coming from 151 mostly senior management users and is organized into user folders.  I didn’t want to accept everything into my analysis, so I made the decision that I would only look into messages contained within the “sent” or “sent items” folders."

'There are a number of possibilities:

  1. Think about how the emphasis of monetary policy changes over time.  What is the effect of the financial crisis on one of more central banks. 
  2. The effect that new members or a new hear has on policy. 
  3. The common characteristics of central bank policy.  How does this tie in with co-movement of international assets? 

Saturday, November 02, 2013

Inequality: Labour's share lost | The Economist

Inequality: Labour's share lost | The Economist:  What is behind the fall in labour share of income?
"Part of the decline, especially in Europe in the 1980s and 1990s, is attributable to labour-market liberalisation. Some of the decline, especially in America in the 2000s, can instead be attributed to exposure to imports from big emerging markets. But across the whole of the period and all countries (including emerging markets like China) technology seems to be the most important factor. Technology has gotten better and much cheaper over the past generation, and that has allowed firms to substitute capital for labour across a broad range of occupational categories. In the 1980s and 1990s technology had its greatest effect in production activities, in automation of routine physical tasks. From the 1990s on the impact of technology became more apparent in information-processing roles. Highly skilled workers mostly benefited from these technological shifts, as new technologies (especially in information and communication technology) have been complementary to their abilities. Owners of capital have also prospered. But middle-skill workers have done poorly, as have low-skill workers, thanks to increased competition from those displaced from middle-skill work"

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Economic history: Smith's word | The Economist

Economic history: Smith's word | The Economist:

"ADAM SMITH is known as the father of economics. Most people think of him as the archetypal free-marketeer. But Smith is often misquoted. This post will give a few examples of how people have misinterpreted Smith’s ideas—and show what he really meant.
Smith sowed the seeds of his own problems. He tended to write pithy soundbites that left his ideas open to distortion. One of his best-known quips:"

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