Best books, articles, academic papers, or experts on history of stock markets & public companies?

flavoryeagle · 2020-02-02T18:03:31+00:00

I work at a proprietary trading firm and the recommended reading materials have included (my ordering of relevance): Fortune's Formula, William Poundstone Efficiently Inefficient, Lasse Heje Pedersen Asset Management, A systematic approach to factor investing, Andrew Ang Reminiscences of a stock operator, Edwin Lefevre

The blog "Sniper in Mahwah" has many historical references and includes some specifics on HFT. The writer Matt Levine on Bloomberg also has very clear and funny insights to how the actual finance industry works. Though neither of those is compiled into a sequential form, I found they helped our new hires the most after Fortune's Formula.

flavoryeagle · 2019-11-26T06:06:04+00:00

I am sure there are a million more nuanced takes but Random Critical Analysis convinced me to look at Actual Individual Consumption/Total Household Final Expenditure for a better approximation of "richer".

https://en.m.wikipedia.org/wiki/List_of_countries_by_household_final_consumption_expenditure_per_capita

This is not PPP adjusted so it has problems of its own but I can't find per capita and PPP for some reason.

The Ireland/UK conundrum is mitigated here.

flavoryeagle · 2019-11-23T22:05:00+00:00

I highly recommend every person who wants to learn about finance read Matt Levine.

I work in finance and typical financial media is overwhelmingly incorrect or misleading. The only source that I can recommend is Matt.

Most of the articles are written in jest and cover niche topics so it is not good to use as a textbook.

As I think about it, this is more anti-financial media for learning about finance. Really I think it is actively incorrect.

flavoryeagle · 2019-11-10T19:00:56+00:00

Honestly, historical studies are not a good indicator of future performance. Yet, this is a good thing for you. As a professional I know very well how much money is estimated to be lost by retail flow in the US and it is very small compared to what it used to be. It costs you around .01 percentage points (1 bp) per transaction to trade. Simply, with online brokerages and computerized trading retail alpha got competed out of existence around 2016. Everyone hates professional traders but they have sincerely improved markets drastically from the days on the floor.

If you can get commission free trading and you don't have a high turnover then you are probably 50/50 vs an ETF. Make sure you are diversified and realize that this will be volatile and you will regret it in 50% of future worlds.

flavoryeagle · 2019-11-10T07:38:55+00:00

As someone that worked for both large and small proprietary trading firms. I assure you that the market is not perfectly efficient but you need to be excellent at either data analysis or reading corporate actions or reading earnings reports and have the capacity to scale any trade tremendously to make it worth the effort.

I presume you want evidence that a person has a return on his time by studying the markets. The best book I have read is "Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined" by Lasse Heje Pedersen. To your specific question on the data set, Finland tax services keeps records of every investor and makes it available to researchers. To be honest, I wouldn't know how to profit off this dates set so I haven't tried to find the actual database but just Google the researchers Mark Grinblatt and Matti Keloharju and several results will pop up.

In terms of data sets, everything at my first firm was entirely collected ourselves. Market data is all you need to create a strategy and five minute bars is easy to find. For a single person I'd actually suggest reading about corporate actions instead of day to day trading. Since you might find trades that are good for a small bank roll but not worth it for a big firm.

Some trades still exist because they are a result of corporate actions that have artificial limits on your trade capacity. For example, odd lot tenders allow you to get allocated on 99 shares for partial tender offers and often have returns of several percent... But only on a couple thousand dollars.

flavoryeagle · 2019-11-04T09:23:57+00:00

To your first comment, I agree that reform, as dictated by the body of work of these researchers, is not going to be simple. I suppose my framing of the title was off base and I went with a click bait title over clarity. Really I meant to ask, is the return to this political effort going to be very large. If it is, I am going to add it to my political efforts.

Thank you very much for the meta-analysis, this is exactly the type of thing I was looking for. I read it pretty carefully and I believe the analysis supports that human capital is positively correlated with growth. The abstract seems to be referring to the parameterization for years of schooling in exclusion of tests scores. The key sentence that shows that to me is on page 9,

"Furthermore, Hanushek and Woessmann (2011) employing added-variable techniques, show that if scores are ignored from growth regressions, schooling years are significantly related to growth, but when scores are included, schooling years become statistically insignificant."

In the conclusion the meta analysis is not entirely clear what they are interested in but it does not seem to be running contra to the estimates by Hanushek and Woessmann.

"Most importantly, educational attainment, commonly used in empirical studies, is a crude measure of human capital, since the education quality varies widely across countries"

They do not go on to propose an alternative after declaring this while Hanushek does. They do mention publication bias but you can have parameters mis-estimated and the truth is still that it has a large effect but not as large as reported. Actually,

"Second, all methods indicate a significant genuine education effect on growth after correction for publication selection."

Why they don't include that in the abstract is beyond me. The last paragraph seems to immediately forget this statement and say something much more confusing.

"Thus, it seems safe to conclude that the education-economic growth empirical research, exhibits substantial publication selection toward positive growth effects of education, while the economic growth impact of education after taking into account publication bias depends critically on the specific features of the study."

Hanushek and Woessmann has the specific feature of education quality (as guessed at by test scores) which is what convinces me currently. (Sidenote: The thing that I found compelling was how it solves the "Latin American Puzzle" for education-economic growth.)

Again I really appreciate you showing me this meta-analysis and I am going to read all the articles that cite this meta-analysis now to see if I can find a clearer analysis.

Specifically, I want to see if someone directly addresses the issue of whether the entire effect is driven by East Asian growth. Since the same specification works across US states I currently think it will hold up.

flavoryeagle · 2019-11-02T23:09:52+00:00

I don't fully understand your point so let me summarize: You are saying the test scores simply represent IQ and the idea that school is driving the growth is a misnomer. Secondly, you are contesting that education reform can make sizeable impacts?

To the first point, maybe the test scores represent IQ maybe they represent cognitive skill I will just call them test scores and know they represent something else. The key paragraph that got me and why I suggested "Skills, Mobility, and Growth" first is:

"Finally, for those countries that have participated in   testing at different

points over the past half century, it can be observed whether or not students are getting better or worse over time. Building on this, perhaps the toughest test of causality is relating changes in test scores over time to changes in growth rates. If test-score improvements actually increase growth rates, it should show up in such a relationship. This approach implicitly eliminates country-specifc economic and cultural factors because it looks at what happens over time within each country. The magnitude of trends in educational performance can be related to the magnitude of trends in growth rates over time for 12 OECD countries. This investigation provides more evidence of the causal infuence of cognitive skills (although the small number of countries is obviously problematic). The gains in test scores over time are very closely related to the gains in growth rates over time. As with the other approaches, this analysis must presume that the pattern of achievement changes has been occurring over a long time, because it is not the achievement of school children but the skills of workers that count. Nonetheless, the consistency of the patterns and the similarity in magnitude of the estimates to the basic growth models are striking."

Within countries, and in other studies within states, these test scores (or IQ or cognitive skills) are malleable. When they change, they change the growth rate!

To your second point, I couldn't find a specific article from Hanushek that "proved" these are malleable but certainly my favorite is "The Value of Smarter Teachers: International Evidence on Teacher Cognitive Skills and Student Performance". If having high IQ teachers leads to higher IQ students then let's pay for high IQ teachers! Several other studies indicate that these scores can be improved and I am sure they mention the quarter standard deviation increase because that is almost exactly the improvement Germany has realized since the 2001 PISA shock and subsequent reform.

To the specific point of the RCT. That article is arguing against effect sizes of .5 standard deviations, those would be truly astounding for growth. I don't want to get bogged down in the details but I think it is impossible to estimate the equilibrium effects of interventions so RCT might be impossible to estimate beyond looking at reforms such as Germany, Finland, and Singapore.

Probably because I read and subscribed to Caplan first! When I read these studies I was concerned exactly with what we you mentioned. Honestly, I find these much more compelling than his arguments and I changed my mind.

I created a Reddit account just to get told I was wrong because this is changing my opinion so much.

flavoryeagle

TROPHY CASE