Index of /transputer/finengineer
http://www.classiccmp.org/transputer/finengineer/

Crazy collection of financial PDF's

Huge list of articles on finance-related topics

One is that the financial press isn’t in the business of supplying useful information; it’s in the business of feeding people’s lust for predictions. “You keep buying the magazine regardless of how the forecasts turn out,” Wellington says, “and they’ll keep supplying the forecasts.”

Blaine Lourd got rich picking stocks. But then he realized that everything he thought he knew about the markets was wrong. And he's not alone.

As a group, professional money managers control more than 90 percent of the U.S. stock market. By definition, the money they invest yields returns equal to those of the market as a whole, minus whatever fees investors pay them for their services. This simple math, you might think, would lead investors to pay professional money managers less and less. Instead, they pay them more and more

Like a lot of people who end up on Wall Street, Blaine Lourd just sort of stumbled in. He'd grown up happy in New Iberia, Louisiana. His father had made a pile of money in the oil patch, and Blaine assumed that he too would one day eat four-hour lunches at the Petroleum Club, hunt ducks on the weekends, and get rich. His older brother, Bryan, had left Louisiana to make what seemed like a quixotic bid to become a Hollywood agent, but Bryan was gay, even if he pretended not to be. (He's now a partner at Hollywood's Creative Artists Agency.) Blaine was distinctly not gay and felt right at home in Louisiana—right up to the moment when, during his third year at Louisiana State University, the price of oil collapsed and took the family business with it. That was when he realized he had no idea what he would do with his life.

The markets are roiling, money managers & banks are posting disappointing returns, and people are beginning to wonder if they chose the wrong guy in Greenwich to take 2% of their assets and 20% of profits. But what if the problem isn’t the guy but the idea that makes him possible: the belief that the best way to invest capital is to hand it to an expert? As a group, professional money managers control more than 90% of the US stock market. By definition, the money they invest yields returns equal to those of the market as a whole less the fees investors pay them for their services. This simple math, you might think, would lead investors to pay professional money managers less and less. Instead, they pay them more and more. "If you put a thousand people in barrels and push them over Niagara Falls, some of them will survive. If you take those guys and push them over again, some of them will survive. And they’ll write books about how to survive being pushed over Niagara Falls in a barrel."

FTA: 'Blaine Lourd got rich picking stocks. But then he realized that everything he thought he knew about the markets was wrong. And he's not alone.' (note: Dec. 2007 issue!)

The Matrix, but with money

Supercomputers pitted against one another in a high-stakes battle of attack and counterattack over a global network where predatory algorithms trawl the information stream, competing every millisecond to gain an informational advantage over rivals. It sounds like Hollywood fiction, but it's just an average trading day on the stock market.

illiquid asset

Quants come in three basic varieties. 1. Structurers: people who price complex financial instruments. 2. Risk managers people who manage portfolio risk 3. Quant traders people who use statistics to make money by buying and selling most quants are structurers. Of course, there is often bleed over between these varieties -but it’s a useful taxonomy for looking for work. I’ve done a little of all three at this point (very little, honestly), and have always liked quant trading problems more than the other two varieties. It’s the most ambitious, and the most likely to net you a career outside of a large organization (go me: Army of one!). It’s also the most mysterious, since successful quant traders don’t like to talk about what they do. Structurers and risk managers have to talk about what they do, almost by definition. Quant traders gain little from talking about their special sauce.

***** very good and deep articles on finance topics by "Locklin on science"

vocab of "job specs" in trading

Cool tool to practice what day trading is like before you actually do it and bankrupt yourself!

The Worlds First Web Based Day Trading Simulator. Practice trading US equities with our stock trading simulator tool. Become a master day trader before you committ your capital

imperfect people create imperfect financial situations, regardless of prior experiences. fascinating!

Postrel on a laboratory experiment where people buy and sell a guaranteed and specified security. "Here, finally, is a security with security—no doubt about its true value, no hidden risks, no crazy ups and downs, no bubbles and panics. The trading price should stick close to the expected value. At least that’s what economists would have thought before Vernon Smith, who won a 2002 Nobel Prize for developing experimental economics, first ran the test in the mid-1980s. But that’s not what happens. Again and again, in experiment after experiment, the trading price runs up way above fundamental value. Then, as the 15th round nears, it crashes...you don’t just get random noise. You get bubbles and crashes. Ninety percent of the time. So much for security. "

These lab results should give pause not only to people who believe in efficient markets, but also to those who think we can banish bubbles simply by curbing corruption and imposing more regulation. Asset markets, it seems, suffer from irrepressible effervescence. Bubbles happen, even in the most controlled conditions.

financial bubbles

At least that’s what economists would have thought before Vernon Smith, who won a 2002 Nobel Prize for developing experimental economics, first ran the test in the mid-1980s. But that’s not what happens. Again and again, in experiment after experiment, the trading price runs up way above fundamental value. Then, as the 15th round nears, it crashes. The problem doesn’t seem to be that participants are bored and fooling around. The difference between a good trading performance and a bad one is about $80 for a three-hour session, enough to motivate cash-strapped students to do their best. Besides, Noussair emphasizes, “you don’t just get random noise. You get bubbles and crashes.” Ninety percent of the time.

From MIT. Information on Emerging Technologies & impact on business & society

academic study claims to use text in news to automate trading and beat Wall Street. Tested on 5 weeks + bizarre informative features --> sounds fishy

The ability to predict the stock market is, as any Wall Street quantitative trader (or quant) will tell you, a license to print money. So it should be of no small interest to anyone who likes money that a new system that works in a radically different way than previous automated trading schemes appears to be able to beat Wall Street's best quantitative mutual funds at their own game.

It's called the Arizona Financial Text system, or AZFinText, and it works by ingesting large quantities of financial news stories (in initial tests, from Yahoo Finance) along with minute-by-minute stock price data, and then using the former to figure out how to predict the latter. Then it buys, or shorts, every stock it believes will move more than 1% of its current price in the next 20 minutes - and it never holds a stock for longer.