That’s very nice…Happy to say that I study fractals …
That’s very nice…Happy to say that I study fractals …
Category High-frequency Trading, Microstructure
Speed, machine, and co-location are the attributes that we assign to HFT and the reason why HFT is often blamed for destabilizing markets. But these attributes are somewhat irrelevant if there are no special order types. Another superb presentation by Haim Bodek clarifies this for us:
There are 13 exchanges and over 40 alternative trading systems (e.g. dark pools) in the U.S. But something I didn’t know was that market makers can buy incoming order flow from your broker and cherry pick the trades the market maker wish to trade against and route the “unwanted ones” to exchanges or ATS. Haim Bodek and Sang Lucci have two new videos to explain this:
I often say to many that being a researcher is just like being an entrepreneur. We have a product to bring to the market, our research, and we have to market our research just like marketer. An entrepreneur takes risk. A lot of it. And the entrepreneur’s success is derived from the risk and often due to randomness… Now I want to bring you to this website: foundation.bz which contains a series of videos of the top tech-entrepreneurs of our current time like Evernote and Foursquare. They go through their failures, where their business ideas comes from, etc. The key here is to listen to some of these interviews and seek to understand how their experience is related to the daily life of a researcher. You will see how similar an entrepreneur and a researcher’s work and idea generation are similar.
My favorite videos
Phil Libin (the guy behind Evernote)
David Copperfield (YES the magician)
Tony Hsieh (the guy behind Zappos)
A former marketing PhD student of UBC, Ravi Mehta, now assistant professor at the University of Illinois, previously research how ambient noise can enhance creativity. The reasearch is now published in The Journal of Consumer Research and the findings caught the attention of many, particularly New York Times’ journalist Anahad O’Connor. As pointed out in the NYT’s article, ambient noise like the noise found in coffee shops helps to focus the mind on creative task. That is not surprising to me. I am always search for good ambient sound or music to listen when I work and I see that my mind is definitely more focused when I hear some ambient music or noise. A dead environment like a library is no good for me. Here are two of my favorites albums to listen to when I work:
Blade Runner Original Soundtrack by Vangalis
Tim Hecker — The Ravedeath 1972
I am far away (at least 3 years) from now until the academic job market. Like any job market, the objective is to get picked by one of your favorite employer. We usually fall in the same routine for the job market in hope to get “picked”: have a very good job market paper, prepare a strong package to submit to universities, prepare your interviews and rehearse your job talks many times. These are crucial and necessary steps but can there be other crucial steps that we are forgetting? Seth Godin, which I consider one of the best philosophical marketing guru on earth wrote a nice blog post on “Getting picked (need to vs. want to)”. We all want to get “picked” but maybe we have the “obligation to seek a different path” like Godin is saying or at least combining the two paths: the traditional job market path and another one which may be truly unique to your personality. Are there any other paths?
I am currently reading a great (and short) book by the Japanese author Haruki Murakami titled “What I talk about when I talk about running”. Murakami usually writes great fiction novels such as Norwegian woods or Wind-up bird chronicle but this book is really what the title says… what he talks about when he runs. Murakami is a long distance runner and running is one of his passion. This is like a sort of a memoir of Murakami’s life but you really have the sense that running and pushing his limits really helps him to write better novels. I also run, not as much as him nor do I run long distance (usually not more than 15km) but I run often. Running helps me to solve my research problems and it really helps to generate news ideas for future research. We all face moments where we lack creativity and I believe running helps to rejuvenate your creativity and that is the sense you get from reading Murakami’s book. I strongly suggest this little wonderful book to all researchers. Some of you will relate to Murakami’s passion for running because you are runners as well and for others, it might initiate the desire to start running.
Category Personal Finance, Research, Value investing
This post is resource page for those who wish to become value investors. First, I have to admit something…I am not really a value investor…yet! Value investing is the “methodology” of investment that I appreciate the most and I wish to practice value investing as a pastime (I want 50% of my portfolio to derive from value investing). But, let’s face it… I am a PhD finance student! So you know like me that there are few finance researchers that are successful investors or actually talk about their own personal finance experience. Have you ever heard a researcher in finance bragging about their successful investments? Not much right? In my case, I started to invest at the end of my bachelor studies – quite late I have to say – but that is when I had enough money to open an account with a discount broker and to really buy and diversify a portfolio (you don’t need much actually to start with…let’s say $5,000?). During my masters, I had received few bursaries that allowed me to save more money and invest. I first started investing my money in index funds such as short-term bonds, emerging markets, broad Chinese market (not covered in traditional emerging market index funds), international MSCI, and the U.S. stock market. My first purchase of an actual stock was Wells Fargo — after a sudden drop in the market. There wasn’t much rational analysis behind this purchase. I was only taking advantage of a sudden, somewhat irrational, drop in the market. You know like me that Wells is a solid business as we speak (according to Buffett).
Over the course of my bachelor and master studies, I read some books and blogs on value investing. Despite the fact that my research specialty that I wish to develop through my PhD has nothing to do with value investing, I want to share all the great resources that I found and will continue to find on the subject. I also do this for my future students… I wish I had a professor that would have done the same : )
How to get acquainted with value investing? (very briefly…)
First and foremost you must read “The Intelligent Investor” by Benjamin Graham. This step is crucial! Next, I would jump on reading multiple blogs on the subject of value investing. Many give insights on their successful investments, analyze various stocks using the value investing methodology and show you their steps of analysis, provide you with resources to evaluate your own stocks, give you multiple insights on which stock that you should pay a close attention to, and more importantly learn from their mistakes!
The Frog’s Kiss – very detailed and well written analysis of stocks
Oddball Stocks – detailed and super clear analysis of net-net stocks (and other types). Also pays close attention to international stocks. One of my personal favorite blogs
Above Average Odds Investing – very popular and detailed analysis of stocks
Barel Karsan – covers various topics on value investing
Classic Value Investors – covers various topics on value investing, provides interviews with financial managers, and some stock analysis
Old School Value (OSV) – One of my personal favorite website on value investing. Provides analysis, various insights, and more important the author of this site developed an amazing value investing tool to analyze stocks (more on that later)
Tools of analysis
Once you get the habit of paying a close attention to these blogs (use Google Reader to keep track of blogs!) I highly suggest you to turn to Old School Value stock analysis tool for $137 (really good investment – trust me!). For individual like us who can’t really put our hands on Capital IQ or Bloomberg – this is the best tool out there. And to some extent, I am willing to say that OSV stock analysis tool beats both Capital IQ and Bloomberg for its simplicity and on other aspects (price, etc.)
Key steps to follow in your valuation… basically how to invest!
A very good tutorial on how to invest in terms of what step to follow in your research and valuation of stocks is provided on the OSV website by the author’s friend Ernie. This tutorial is like a mental mapping of the steps to follow to increase your chance of success with your investments.
“Valuation Multiples: A Primer” is document written by UBS in 2001 on valuation multiples. It is clear, concise, and covers if not all the key valuation multiples: how to use the multiples in the valuation of a stock, their limitations / drawbacks, etc. This document was found by OSV and Jae Jun (the author of OSV) declares that this is the best valuation document available!
Benjamin Graham and David Dodd – Security Analysis … a masterpiece! I would suggest however the 1951 edition available here simply because you don’t need to go through the accompanied-CD for the appendices.
Many have told me that I must read this following book:
This book is out of print, really hard to find, but is available on the web in PDF (you have to search!). I haven’t read this one yet but I will!
Last summer I had the pleasure to assist my adviser Prof. Adlai Fisher and his buddy and co-author Prof. Laurent Calvet at HEC Paris to do some research assistance on their new paper to be published in the Contemporary Mathematics titled Extreme Risk and Fractal Regularity in Finance. Their paper is a review of multifractals in finance with an updated component of two of their previous papers: (1) Multifractality in Asset Returns; and (2) How to Forecast Long Run Volatility.
I plan for the beginning of the summer to put online the codes to replicate these papers. There seems to be more and more interest in fractals in finance… take a look at an interesting forthcoming paper in the Journal of Financial Econometrics by Chen, Diebold, and Schorfheide titled A Markov-switching multifractal inter-trade duration model, with application to US equities.