Mar

18

Here are some books I am reading with valuable techniques, stories, and insights for speculators.

Modeling Survival Data: Extending the Cox Model , by Terry Therneaus and Patricia Grambsch.

Survival statistics are the branch of statistics that are most applicable and useful for speculators relative to their use. It answers such questions as how long you should expect it to be before an event happens, like a 10% decline, or a return to 20% in the vix, or a run of X declines, or a move down of four percent, or a down month, or an X day maximum, and many more important questions. As such, you can never know too much about survival statistics and the above book is an excellent augmentation for those who have done some preliminary work in the field with a book like Hougaard's Analysis of Multivariate Survival Data.

The Therneaus book is particularly good in extending the survival model to improving fits thru residual analysis, taking account of multiple events for the same subject, like an extreme in either direction, or heart attack, or gum disease, time dependent decays, influences of other variables, frailty models (excess risk in different categories), individual survival estimates, likelihood methods for estimating the expectations and confidence intervals for failure, and survival probabilities. It's written so that anyone with a basic stats course and calculus course could profit from it.

I am also reading HMS Surprise by Patrick O'Brian. I always find that the insight about human behavior from a keen observer like O'Brian or Hemingway is infinitely superior in explanatory power to the latest ad hoc studies of behavioral anomalies in the field of cognitive psychology. For example, in Surprise, O'Brian talks about the state of lassitude and happiness that anticipated wealth causes and how this can lead to complacency. I find this insight much more useful than the endowment effect studies with college students that show they'd be much more distressed to lose 10 bucks than pleasured from making 10 bucks, or the similarly flawed studies that show once you've bought a big ticket item, you'd only sell it for much more than you paid. Of course the O'Brian books are a flow activity, that bring you into a good world, with noble men, and heroic accomplishments, hilarious anecdotes, marvelous examples of benevolent behavior, and perfectly evolved customs for maintaining an even disposition when exposed to the unpredictability of the sea or markets, and the most beautiful friendship in literature, as well as being the best historical novels ever written. I have only read the complete set three times so far, but I have been listening to the Patrick Tull recording on tape relatively continuously for the past 10 years.

Evolution and Human Behavior, by John Cartwright.

This is not only a history of the ideas and trends that have led to our current knowledge of human behavior from an evolutionary, anthropological, and psychological viewpoint, but a modern review of Darwin's thinking on how natural and sexual selection shape activities. Every page has numerous suggestive specific hypotheses relating to markets that one can derive from the extensive work that has been done on the field in birds, mice, fish, dogs, and primates.

Human behavior in markets has followed similar paths to those traversed by other species in adapting to their environments. Our understanding of these processes has suffered from the same limitations and biases as those that prevented the evolutionary biological approach from reaching its current pinnacle of explanatory and predictive power. The main overall insight I have is that the market has adapted itself to provide a forum for the struggle of humans to maximize the future of their genes, money, and reproductive fitness. The book suffers from the idea that has the world in its grip and is particularly unfair and strident in its reviews of Galton's work, as is customary for all agrarian reformers. This is because they have to believe that humans are perfectly malleable to accept the egalitarianism embodied in the Robin Hood Society.

The Romance of Commerce , by Gordon Selfridge 1918 (Written in 1910).

Our current material and psychic well being, which in the last hundred years under a enterprise society have undergone more improvement than in the previous 100,000, and allow the common human today to live better and healthier than the kings of yesterday, is due to the entrepreneurial sprit, improvement in technology, and the institutions that encourage it. Selfridge's book which covers such topics as commerce of the ancients, the Fuggers, the Hanseatic League, the East India Company, The Hudson Bay Company, the Fantastic in Trade, the Great English and Japanese Merchants, guilds, early British commerce, along with such titles as Improving the World, by Indur Goklany, get me into a positive spirit so that I wish to continue the game, and improve myself and the world by investing and speculating. This is a sorely needed pillar to stand on when the latest weak links in the economy are brutally about to create undue pessimism for the strong to take chips from the weak as documented over and over again in other species and situations by Cartwright.


Comments

Name

Email

Website

Speak your mind

Archives

Resources & Links

Search