Posted by: Rajan Sambandam in Markets on
Dec 26, 2008
Are market bubbles inevitable? Virginia Postrel has an interesting column in The Atlantic that explores the topic and pretty much arrives at that conclusion. Lab experiments run by the Nobel Prize winning economist Vernon Smith have repeatedly shown the formation of market bubbles. But as traders gain experience the bubbles become less likely and eventually disappear. So it appears that experience can have a modifying effect on bubble formation. However, when market conditions change, even experienced traders stumble and bubbles form.
Posted by: Rajan Sambandam in Polls, Politics, Markets on
Oct 12, 2008
To read the first part of this post click here. In that we discussed how to use the available information to predict a winner in the current presidential race. While the polls (including the poll average) gave a small edge to McCain at that time, the other measures gave a mixed picture with the combined measure giving Obama a slight edge. Since that post a month ago the race has changed quite a bit. In this post I will revisit those numbers to see where they stand, how they have changed and what that means when you track such numbers. In the next one we will look at the impact of race on the race, or the so called Bradley Effect.
Against the Gods: The Remarkable Story of Risk by
Peter L. Bernstein Given what has been happening in the economy recently, this book (written ten years ago) provides an excellent foundation for understanding how we ended up here. In telling the story of risk, Bernstein focuses on how much people believe the past determines the future. The more we believe we understand the past, the more certain we are of what will happen in the future. Quantifying the past helps enormously in bringing certainty to the future. But risk lurks in the shadows surrounding certainty and underestimating it because of our blind faith in numbers and computers can lead, he says, to disaster. But what makes this book a wonderful read is that it really does tell a story stretching back millennia and is populated with exotic places and interesting characters. For someone interested in this topic it is time well spent.
Posted by: Rajan Sambandam in Polls, Politics, Markets on
Sep 12, 2008
A question that is of great interest now and the common response tends to be "who's leading in the polls?". You often hear people say that the latest poll from some reputable organization shows one candidate with a 3 point lead. Is that the best measure we have of predicting who will win the Presidential election? I submit that it is not and will walk you through the different measures available and what is most likely the best one. I say most likely because nothing predicts the future with complete certainty. Further, the aim here is not to examine the political strategies used by the candidates or speculate on who has a better ground game. We just want to see what is the best way to predict the winner, using all publicly available information.
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