Falkenblog

Best survey of the subject I have found (most are bullshit) is Finding Alpha by Eric Falkenstein which he has graciously offered for free on his blog. By the subject I mean, finding an edge in trading. Spoiler alert there is no system to follow. He wrote algos for a local options market maker, had a significant Econ PHD thesis. The basic premise of the book is that real Alpha is rare, idiosyncratic and gets exploited by those in the know and eventually the edge goes away after several years. He gives several classic historic examples which are what made this book so interesting and unique to me. http://falkenblog.blogspot.com/2016/08/finding-alpha-pdf.html

My favorite quote on Nassim Taleb's writings: Taleb’s writings are filled with certainty, anger, and immodesty, having the Godelian impossibility of someone shouting 'I am the most humble!' Spot on. From http://falkenblog.blogspot.com/2009/03/review-of-talebs-black-swan.htm…

Not entirely convincing. I personally prefer Falkenstein as my Chomsky critic: The spread is a debating tactic where you present a set of supporting arguments so wide and particular your opponents are unable to rebut them all because 1) they have day jobs and 2) they have limited space or time to address them in any particular forum. A champion spreader is Noam Chomsky, who selectively recites facts of world history from Indonesia, Russia, to El Salvadore and 200 places in between, which no one but a professional in Comparative Economic Systems would be familiar with (indeed, comparative economic systems was a flourishing economic subdiscipline precisely because it couldn't be easily refuted because those communist countries didn't have a free press and made up their production data, but after 1989 it was obvious this field was simple wishful thinking dominated by deluded Marxists-note:of the ones I knew!). http://falkenblog.blogspot.com/2012/09/economists-love-spread.html

This is actually an awesome illustration of why a lot of famous results in academic finance were wrong in the 70s and 80s. Returns don't average, they multiply. If you get HHTT or TTHH you're in terrible shape: 2.25 * .36 = .36 * 2.25 = .81 You started with $1 and now have 81 cents. I recently learned that a lot of early computer-era academic finance actually made the same error of averaging returns, as described in Finding Alpha: http://falkenblog.blogspot.com/2016/08/finding-alpha-pdf.html

The book The Missing Risk Premium covers a lot of the evidence. The author give a synopsis here: https://falkenblog.blogspot.com/2013/07/missing-risk-premium-synopsis.… Low volatility investing is based around the observation that low volatility stocks have higher average returns than high volatility stocks. This article is a good summary: https://www.researchaffiliates.com/en_us/publications/articles/s_2013_…

I think this is a sound, critical review of the Black Swan & Taleb in general. Funnily enough, the criticisms of him are more relevant/prominent now than nearly a decade ago when this was written. http://falkenblog.blogspot.com.au/2009/03/review-of-talebs-black-swan.…

This reminds me of an article I read a year back, same topic: http://falkenblog.blogspot.com/2013/07/my-big-toe.html "The bottom line is, if we are in a simulation, there needs to be compressive sampling because quantum effects between particles would otherwise require an infinite amount of memory, so the meaning of the wave function is that it's for data compression. [...] The fortuitous data compression implicit in wave functions is merely another reason to suspect we are in a simulation. "

Eric Falkenstein's various Taleb takedowns are fun. http://falkenblog.blogspot.com/2009/03/fama-on-taleb.html http://falkenblog.blogspot.com/2012/11/taleb-mishandles-fragility.html http://falkenblog.blogspot.com/2010/12/nassim-taleb-imitates-kanye-wes… http://falkenblog.blogspot.com/2009/03/review-of-talebs-black-swan.htm…

On the other hand, he's unilaterally refused to disclose actual audited returns for the funds that he's been involved with. This is very convenient for marketing his books and views, but creates an inaccurate impression of how profitable his approach really is: http://falkenblog.blogspot.com/2010/08/nassims-selective-returns.html .

Stop-losses are not as effective or nearly as simple as they are described in typical financial media. http://falkenblog.blogspot.com/2011/02/stop-loss-myth.html (with additional citations in the blog)

> Canada has the lowest ratio of net debt to gross domestic product among the Group of Seven industrialized countries If we're including household debt this does not square with what I've read elsewhere. p.s. I've immensely enjoyed various sharp screeds from recent years ripping Taleb a new one: http://scottlocklin.wordpress.com/2009/07/17/nassim-taleb-clown-of-qua… http://falkenblog.blogspot.com/search?q=taleb

Benfords law is instrumental in fraud detection, the Enron guys were wise to it, but Bernie Madoff was not: http://falkenblog.blogspot.com/2008/12/benfords-law-catches-madoff.htm…

I'd asked about the application of Benford's law to the Madoff case in a previous thread (http://news.ycombinator.com/item?id=396942); this is one take. Note from the item's comments, though, that someone else ran the same analysis and came to a different conclusion: http://falkenblog.blogspot.com/2008/12/benfords-law-catches-madoff.htm… (There's also some discrepancy in the numbers each used, so I expect further corrections.)

I wasn't going to upgrade to S4, but now that I read this rant, makes me want to go and get one. Every week some columnist gets on a soapbox and drones about how they are offended. Just read a good blog post about it: http://falkenblog.blogspot.fr/2013/03/taking-offense-is-not-righteous.… "Curiously, a former definition of impoliteness has become a new focal point for all sorts of political and psychological offense. I remember Miss Manners noting that politeness has two, related, sides: not giving or taking unintentional offense. That's clearly old school. There seems to be a public bounty for perceiving slights, and lots of columnists are full-time commentators noting the latest injustice to their tribe. There's a website called MicroAggressions documenting slights felt by people who don't appreciate the guy who opened or failed to open the door for them. Interestingly, the more they talk about things, the more people get upset by people getting upset ad infinitum."