Daniel Kahneman, et al.
Summary via publisher (Little, Brown Spark)
In Noise, Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein show the detrimental effects of noise in many fields, including medicine, law, economic forecasting, forensic science, bail, child protection, strategy, performance reviews, and personnel selection. Wherever there is judgment, there is noise. Yet, most of the time, individuals and organizations alike are unaware of it. They neglect noise. With a few simple remedies, people can reduce both noise and bias, and so make far better decisions. Packed with original ideas, and offering the same kinds of research-based insights that made Thinking, Fast and Slow and Nudge groundbreaking New York Times bestsellers, Noise explains how and why humans are so susceptible to noise in judgment—and what we can do about it.
The ETF Portfolio Strategist: 14 May 2021
In this issue:
- Across-the-board losses this week for global markets
- Portfolio strategy benchmarks take a hit
Research Review | 14 May 2021 | Stock Returns
Long-Horizon Stock Returns Are Positively Skewed
Adam Farago and Erik Hjalmarsson (University of Gothenburg)
April 28, 2021
At long horizons, multiplicative compounding induces strong-to-extreme positive skewness into stock returns; the magnitude of the effect is primarily determined by single-period volatility. Consequently, at horizons greater than five years, returns –individual or portfolio– will be positively skewed under reasonable parametrizations. From an investor perspective, the strong positive skewness implies that the mean compound return will serve as a poor guide for typical long-horizon outcomes. Moreover, the large effects of compounding on higher-order moments are shown to affect the validity of Taylor expansions used to approximate preferences for skewness, when applied to returns of annual or longer horizons.
Macro Briefing: 14 May 2021
* CDC says vaccinated Americans can go maskless in most settings
* Fighting in Gaza intensifies as Israeli ground forces launch attacks
* Fed governor Christopher Waller predicts inflation surge will be temporary
* Colonial pipeline paid roughly $5 million to ransomware attackers
* US Producer Price Index rose sharply in April
* US jobless claims continued to slide last week, dropping to new pandemic low:
How Long Will ‘Transitory’ Inflation Last?
The US Consumer Price Index surged in April, topping estimates by a wide margin. The question is whether this is the start of an inflationary wave or just the latest run of noise?
Macro Briefing: 13 May 2021
* Deadly conflict continues between Israel and Palestinian militants in Gaza
* Colonial Pipeline restarts operations after ransomware attack closed system
* GOP Senate Leader: ‘good chance’ of deal with Biden on infrastructure
* US budget deficit jumps to record $1.9 trillion in first seven months of fiscal year
* Tesla CEO Elon Musk: car maker stops accepting bitcoin for car purchases
* Atlanta Fed business inflation expectations continue to rise in May
* How long does ‘transitory’ inflation last?
* US consumer inflation surged in April — 4.2% annual rate is highest since 2008:
The ETF Portfolio Strategist: 12 May 2021
As trend-watching goes, there was only way to cast your gaze today: down. The selling wave left almost no place to hide in risk assets. The catalyst, at least, is no mystery, or so it appears: higher inflation.
Energy Stocks Continue To Thrash Tech Shares Year To Date
It’s been a year of trading places for performance outliers in the US equity sector space. The formerly high-flying tech sector is now the laggard while energy stocks continue to hold the lead, based on a set of ETFs through May 11.
Macro Briefing: 12 May 2021
* Israel-Palestine conflict continues to escalate, sparking fear of new war
* Today’s US inflation report for April is expected to show sharp increase
* Signs of panic buying of gas along East Coast after pipeline shuts down
* Major US fuel pipeline moving closer to reopening
* US detentions at border rose to highest in two decades in April
* UK economy fell 1.5% in the first quarter but rebounded in March
* Small business optimism rose in April but report trouble hiring workers
* US job openings soared in March, but hiring remained relatively subdued:
Estimating Fair Value For The 10-Year Treasury Yield
The world is awash in efforts to model a theoretical value for the stock market – the CAPE ratio, for example. But while the equities hog much of the attention on this front, similar analytics for the world’s most important interest rate are no less valuable.