The Little Book of Safe Money Jason Zweig Reviewed by Javier Estrada The Little Book of Bulletproof Investing Ben Stein and Phil Demuth Reviewed by Javier Estrada View PDF… Read more
4th Quarter (2010)
CASE STUDIES: Linear Causality
Jack L. Treynor View PDF… Read more
What’s the Best Way to Trade Using the January Barometer?
Michael J. Cooper, John J. McConnell and Alexei V. Ovtchinnikov According to Streetlore, as embedded in the adage “As goes January so goes the rest of the year,” the market return in January provides useful information to would-be investors in that the January market return predicts the market return over the remainder of the year… Read more
The Rule of 72 for Lifetime Savings
Thomas K. Philips Financial planners often impress upon their clients the power of compounding by quoting them the Rule of 72: With annual compounding, a dollar invested in an investment account at a constant interest rate of r% per annum grows to two dollars in approximately 72/r years. In this note I show that the… Read more
How Quickly Do Equity Prices Converge to Intrinsic Value?
Dennis R. Capozza and Ryan D. Israelsen This research hypothesizes that in markets where information costs, transactions costs and the economic impact of information can vary widely, we should expect both significant predictability and systematic variation in the predictability. Controlling for other factors, we find that on average, 15-30% of the difference between the stock… Read more
Equally Weighted Rebalancing as the Average of all Investment Strategies
Masahito Shimizu In a performance evaluation, it is important for both sponsors and portfolio managers to estimate the opportunity set of possible performances. In this regard, we investigate the average performance of all possible strategies and how performance varies across strategies. We show that the average is equal to the performance of the equally-weighted rebalancing… Read more
SURVEYS AND CROSSOVERS: Implementing Option Pricing Models Using Python and Cython
Sanjiv R. Das and Brian Granger In this article we propose a new approach for implementing option pricing models in finance. Financial engineers typically prototype such models in an interactive language (such as Matlab) and then use a compiled language such as C/C++ for production systems. Code is therefore written twice. In this article we… Read more
INSIGHTS: A New Taxonomy of the Dynamic Term Structure Models
Sanjay K. Nawalkha, Natalia A. Beliaeve and Gloria Soto This paper gives a new taxonomy of dynamic termstructure models (TSMs) that classifies all existing TSMs as either fundamental models or preference-free single-plus, double-plus, and triple-plus models.We exemplify the new taxonomy by considering preference-free versions of some well-known fundamental short rate models. Single-plus extensions of the… Read more
PRACTITIONER’S DIGEST
Volume 8, Number 4, (2010) View PDF… Read more