Mar

4

An article in the Sunday New York Times connects the success of the Russian tennis program with a combination of talent and very young training at Spartak tennis. The general idea is that myelinization (fatty insulation on nerve fibers) patterns may be affected by repetitive reinforcement at very young ages, which in turn may create athletes superior to those who train older.

This recalls the European invasion of off-road motorcycle racers in the 1960s, who dominated US motocross racers for about a decade. One of the great motocross champions was Swede Torsten Hallman, whose book, "Mr. Motocross," documents this period in the sport, and possibly gives a hint of causality. He began racing at a very young age with his older brothers and other experienced riders; perhaps the combination of talent, fearlessness, and highly repetitive early training helped mold a champion. In America of the 50s and 60s off-road motorcycling was not as evolved, and boys prior to this likely were not as exposed as those in Europe.

American racers today dominate motocross, much as Europeans did in the 60s. Unlike the 60s, many of today's racers grew up on motorcycles and racecourses open to young boys, and quite possibly their early-myelinated tracts helped carry them to the podium.

Early learning is also known to effect cognitive skills. Studies (functional scans) suggest brain centers associated with multiple language skills are different, depending on the age second languages are learned.

Do today's generation of traders and hedge-fund quants, who grew up immersed in computers and sophisticated games, have different brains than past generations scanning newspapers or tapes? Such a competitive cohort could be more aware of emotion-traps played out in past markets, and possibly contribute to ever increasing market efficiency (randomness).

Speaking of traps, looking at SPY daily returns back to 1993 there were 25 days that dropped more than 3%. Counting from the close of the big drop days and compounding forward 21 days, the market was higher 84% of the time (mean +5%). I made a chart of the compounded mean return following the 25 drops, with 95% CI bars.

Dates of declines, with 21 day forward compounded return:

Date Ret
03/24/03 1.06
09/27/02 1.08
09/03/02 0.95
08/05/02 1.07
07/19/02 1.13
07/18/02 1.06
07/10/02 0.99
01/29/02 1.01
09/20/01 1.09
09/17/01 1.06
04/03/01 1.13
03/12/01 0.99
01/05/01 1.05
04/14/00 1.08
01/28/00 1.01
01/04/00 1.02
09/30/98 1.08
08/31/98 1.06
08/27/98 1.02
08/04/98 0.93
01/09/98 1.11
10/27/97 1.09
08/15/97 1.06
04/11/97 1.14
03/08/96 1.02

Ken Smith remarks:

If the Russian youngsters abstain from alcohol all their lives they might be superior, otherwise no.

Myelinization deteriorates with alcohol consumption. "My nerves are shot" is a refrain by those who consume too much alcohol. I am surprised there are traders who consistently make money yet spend an inordinate amount of time in bars or sipping booze on the stern of streamlined yachts. It can't last.

Nerves get frazzled and traders deteriorate along with nerve protection.


Comments

Name

Email

Website

Speak your mind

Archives

Resources & Links

Search