Thursday, August 30, 2007
Monday, August 27, 2007
Posting Will Be Light
So, we will be at the wake and funeral for the next couple of days. Please keep my sister's family in your prayers as they go through this terrible time.
Friday, August 24, 2007
Wednesday, August 22, 2007
Do Insider Trading and Short Selling Provide Useful Information?
In a new study that just hit the SSRN, they find that combining "standardized" short selling and insider trading provides better information about future returns than either does separately. They create their standardized measures by first calculating average historical levels of insider trading (purchases scaled by total shares outstanding) and then dividing differences from the average by historical standard deviations in insider trading and short interest. They find a number of interesting patterns with these measures:
- The two measures (standardized insider purchasing and standardized short interest) are only very weakly correlated. This means that the two measures aren't capturing the same information. So, there are potential gains to suing both in combination.
- They argue that using patterns in insider purchasing, they can identify "informed" short selling. In other words, when insider trades are in the same direction as short sales, short selling is most likely to be driven by informed traders. In other words, when standardized insider purchases are low (i.e. insiders have bad news) and standardized short interest is high (i.e. short sellers have bad news), subsequent stock returns are likely to be low (and the opposite for high insider purchases and low short interest).
- When they form hedge portfolios that are long the "good" firms (high insider purchases and low short interest) and short the "bad" firms (low insider purchases and high short interest), they get obtain risk adjusted returns (based on 4-factor model) of 0.88% to 1.22% per month.
Read the whole thing (on SSRN in pdf format) here.
Friday, August 17, 2007
Grad School Rules
- Get the (official) rules - know the actual requirements for your program. This keeps you from doing things you don't have to, and makes sure you dot all the necessary I's and cross all the essential T's. Don't rely on your faculty - go to someone who has the responsibility to know the correct rules -- like the graduate chair or the director of the program.
- Get the unwritten rules - most of the "really" important information you need to survive (like how to approach certain classes, who to work with (or not), and where to get help with technical issues) isn't on paper. Make sure you tap the experience of the student who've gone before you.
- Choosing a graduate program - different schools have vastly different profiles. This can be anywhere along the continuum from "survival of the fittest" to ""we look after our own" (luckily, mine was of the second kind). Try to figure out the profiles of the programs you're considering, and make sure it's a good fit for your strengths/weaknesses.
- How to make the best of course work - some very good rules of thumb on what types of courses to take (and how much effort to put into them). In the short run, they're important. But in the long run, keep your eye on the prize - focus on your research, and use courses to help you in furthering your progress towards it.
- Grad school exams - Exams are a "hygiene issue (i.e. you don't get noticed unless they're bad). For "sit down" tests, get copies of old exams, and talk to previous students. For take home exams, also get copies of old exams, but prepare beforehand by having good written summaries of articles (you should be doing this during your seminars in any event).
- Why friends are important - While over-socializing can hurt you, don't be a hermit. Friends can offer emotional support, provide technical assistance or comments on your work, and generally help you in your weak areas. It's likely that grad school peers will become your first non-faculty coauthors. And in addition, no one else will really understand what you're going through like the other people in your program. That's why many of them will become life-long friends.
- Picking your advisor - no advisor is perfect, but yours should have at least one strong suit. Some of the factors to consider are: record in placing students, reputation for competence in the profession, record of coauthoring with grad students, accessibility, ability to offer helpful criticism, expertise, and intellectual style
- Choosing other (non-chair) members for your dissertation committee - The end goals of your committee are to facilitate your getting the dissertation done and to help you get a job. Most of the responsibility for both jobs lies with your chair. But as for the rest of the committee, make sure they have complementary skills, get along, and aren't jerks that will put you through unnecessary hell.
- Why you shouldn't pay for grad school - it can be expensive. Luckily, b-school professors make good money. But in the humanities, that's not often the case. This piece makes some suggestions on how to minimize your debt load coming out.
- Choosing a dissertation topic - should you go with the "big obvious problem", come up with your own new problem, or take a topic from your advisor? Each has pluses and minuses. Whichever you choose, make sure it's something you feel passionate about (you'll likely be working on it and related pieces for several years). Also think about issues of compatibility with your intellectual style, strengths, and weaknesses, the popularity of the topic, and where the topic is in the research life-cycle (too new or too old both have risks).
- What to do while you are working on the dissertation- the short answer is, "as little of non-dissertation activities as possible." It might not be possible (depending on finances), but try to minimize teaching responsibilities. Also, be very leery of moving away from campus - it's much harder to finish your dissertation when you're in another city (to a great extent, it's "out of sight, out of mind" from your professors' viewpoints).
- Writing your dissertation (parts 1 and 2) - part 1 discusses how the different models for how the dissertation fits into your larger career (i.e. is it intended to be drafts of future books.articles, a job marketing tool, etc...). The more interesting (and potentially helpful) material is in part 2, which gives some very useful advice: dissertations are NOT "masterpieces, and the best ones are FINISHED ones. So do good work, but realize that the key thing is to "get er done".
Thursday, August 16, 2007
More Resources For Grad Students
Eric Rasmusen is one of my favorite economists. His text on Games and Information was an invaluable resource during my time in the Ph.D. program. He also has a very well written short piece on writing. He aslo has a blog here that touches on economics, law, and faith (and a pretty broad span of other topics).Enough blogging - back to work. I have data to torture.
Along those lines, Kwan Choi (at the time, the editor of the Review of International Economics) has put together a pretty good collection of pieces on the academic publishing process at How To Publish In Top Journals. Note: it also contains helpful suggestions on dealing with referee comments, being a good referee, and so on.
Finally, assuming you get into a doctoral program, here are some things you probably shouldn't say at your dissertation defense.
Another Reason Why I Hate Meetings
Wednesday, August 15, 2007
And Now For Something Completely Different
I definitely WON'T share this wonderful example of financial engineering (Courtesy of Barry Ritholtz): Constant Obligation Leveraged Originated Structured Oscillating Money Bridged Asset Guarantees, or COLOSTOMY BAGS.If you have any others (whether in good taste or not), send them along (or use the comments section).
From the always popular Monty Python, we have The Stock Market Report and The Money Programme
Finally, here's one of my favorite musicians of days past(Dr. Teeth of the Muppets) singinging The Money Song
Wednesday Link Dump
I've been working on a fairly intensive project that requires me to merge data from five different databases, and two of the databases are pretty large (13 and 60 gigabytes in size, respectively). I'd done much of the work in the last couple of weeks, and then realized that I was using the wrong date to merge things by. I redid some of my programs that had accessed the different databases individually so that they now pulled all the data in one pass. But it took 9 hours to run. It reminds me of the old days in grad school programming on a mainframe when I'd submit the program as I left for the night and would let it run overnight.
But enough wonkery. It's time to clean out my files. And that means a Link Dump:
Hedge Funds and Private EquityThat's enough for now. Back to torturing data.
It's been a rough couple of weeks for hedge funds that use statistical arbitrage and merger arbitrage strategies. Abnormal Returns has it's usual great roundup of links on the topic.
You know it's a private equity bubble when you see this
Here are two pieces on insider trading: The New York Times discusses recent research by Najat Seyhun (the "academic god" of insider trading research) on his new approach to weighting insider trading data. His conclusion is that insiders aren't nearly a bearish as we'd thought. And here the Wall Street Journal (online subscription required) reports that executives have been pretty bullish following the recent market correction.
A good example of a stock spam scam (say that three times fast if you can).
Academic Research and Academia
The reputational effects for Directors from Financial Fraud by Fich and Shivdasani
CXO Advisory Blog reports on research by James Doran, David Peterson and Colby Wright on academics views on market efficiency. They find that while most finance professors believe that markets are semi-strong form efficient, about 20% use strategies that seem to fly in the face of that view.
Raging bull (HT: The Big Picture)
Slate has a good primer on How to speak hedgie that could have been written by Ambrose Bierce.
Labels: Link Dump
Monday, August 13, 2007
A Waterlogged Family Weekend
Sunday we went to a nearby place that has a small hill for skiing & snowboarding during the winter. But during the summer, they have a water slide that's about 5 stories high (built onto the side of the hill) with some great twists and turns. Our kids must have gone down it about 25 times. Since walking up the hill got to be a bit much for the Unknown Wife and I after about the 15th time, we mostly waited at the bottom near the pool and enjoyed the sights and sounds of the kids coming down. We could always tell when it was our daughtergoing down the slide, because her screams made a nice Doppler effect as she got closer.
By this morning, I still had about half the water in my sinuses, and a nice sunburn on the top of my head (it seems like the "ground cover" has gotten a bit sparse). But at least my legs felt o.k - all that biking I've been doing this summer seems to have been good for something.
Friday, August 10, 2007
A Revise and Resubmit
So I might well be starting the new academic year with another publication. It's nothing earth shattering, but at this point I figure another two publications (this one and one other) in the next year should make getting tenure a very good probability.
Wednesday, August 08, 2007
Pointy Headed Bosses Shouldn't be Given Spreadsheets
Wednesday (Birthday) Link Dump
Happy Birthday to youNow that my ears have stopped ringing, I figure it's time for a Link Dump (it's been a while, and I've been taking a bit of a slacker's vacation from blogging). So, in no particular order:
Happy Birthday to you
You Look Like a Monkey
And Smell Like A Zoo
Barry Ritholtz at The Big Picture has been finding and posting some pretty cool visuals (thanks - they'll be used in my classes this fall) on the slicing and dicing of mortgages, here and here.Enough blogging - back to work.
Businessweek.com highlights a new study by Westphal and Clement that finds that top executives try to temper analysts negative reports by currying favor. Not surprising, really, but still a good read.
According to a study by Christopher Clifford of Arizona State university, large block (> 5%) investments by activist hedge funds result in significant operational improvements by target companies.
Joe Carter at Evangelical Outpost lists and explains Five Logical Fallacies
in part 3 of his "How Not To Argue" series.
Here's a very cool YouTube video of a guy repairing high voltage wires from a helicopter. I'll take my current job, thank you very much.
The Wall Street Journal (online subscription required) reports on the sub-par performance of long-short and market-neutral funds.
Friday, August 03, 2007
Using Sub-Prime Loans to Stick It To The Man
HT: Credit Slips
update: it looks like the links at Comedy Central were messed up. It's working now.
If it's not caught early, it can result in a lot of serious and long-ranging problems. But luckily, we did catch it, so it merely means a three-week course of amoxicillin.
But I can;'t let this go without a link to this.
Thursday, August 02, 2007
Some Interesting Uses For The VIX
In this post, he relates changes in the VIX to changes in the S&P (a % change in the VIX results in about a 10 basis point change in the S&P in the opposite direction), with an R-squared of about 50% (i.e. variation in the VIX explain about 50% of the variation of the S&P). He also notes the mean-reversion in the VIX, and that the S&P tends to be high when the VIX is low (and vice-versa).And yes, he's been added to the blogroll.
He lays out some of the math of VIX mean reversion here (caution - serious nerd alert ahead), and gives a few applications here (including a slick way of using implied vcolatility to get beta).
Wednesday, August 01, 2007
At Least I Never Used This Mover
As I recently read on another blog, TNSTAAFL (There's No Such Thing As A Free Lunch). On a related note, Unknown Wife has informed tme that if I don't get tenure, I better find a school to commute to, since she loves our current neighborhood). But I don't think it'll be too much of a problem - I have a pretty good publishing record so far, and I have 5 currently under review.
But just in case, remember - don't go with the big guy.