tag:blogger.com,1999:blog-1905686568472747305.post8544475109700367327..comments2024-03-22T06:22:08.010+00:00Comments on Stephen Law: Huge banking bonus due to five year-old girl "rainmaker" Tia?Stephen Lawhttp://www.blogger.com/profile/02167317543994731177noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-1905686568472747305.post-28034170806521440972011-02-06T16:45:19.333+00:002011-02-06T16:45:19.333+00:00The lesson to draw from this and similar results i...The lesson to draw from this and similar results is to not put your money in managed funds. <br /><br />However, it has not disproved the efficient market hypothesis that the market takes into account all available information in prices. I.e. most things are priced rationally, and it's hard to make better guesses than the market aggregate, and if someone can outguess the market aggregate, it's hard to identify them in advance. <br /><br />You have not shown that the banking sector (the whole thing?) is a scam. No one actually working in the field would talk about "stock market gurus". <br /><br /><br />It's true that someone might have a flawed business plan which makes them a massive profit and bonus 19 years out of every 20, but loses money overall. Their strategy would appear to work for a long time despite being unsound. <br /><br />The solution to that is simply to ban maturity transformation (http://unqualified-reservations.blogspot.com/2008/09/maturity-transformation-considered.html) and then never bail out banks again.Hugonoreply@blogger.comtag:blogger.com,1999:blog-1905686568472747305.post-71381452134728763632011-01-13T19:23:44.475+00:002011-01-13T19:23:44.475+00:00I mean they generally do no better on average than...I mean they generally do no better on average than those picking at random. Some will get lucky and do better, like Tia, and some will do worse.<br /><br />As I say, I think this is fairly well established.Stephen Lawhttps://www.blogger.com/profile/02167317543994731177noreply@blogger.comtag:blogger.com,1999:blog-1905686568472747305.post-82136908927904016752011-01-13T19:20:37.077+00:002011-01-13T19:20:37.077+00:00As I say this is merely anecdotal evidence. Howeve...As I say this is merely anecdotal evidence. However, I think it was designed to illustrate something that is actually well established, that those who play the stockmarket in this way do no better than someone picking at random. My final quote alludes to such studies but I haven't got any references and would like some.<br /><br />Of course the relevance of this to the current enormous bonuses being paid to bankers is obvious.Stephen Lawhttps://www.blogger.com/profile/02167317543994731177noreply@blogger.comtag:blogger.com,1999:blog-1905686568472747305.post-5617850098508081772011-01-13T18:32:03.524+00:002011-01-13T18:32:03.524+00:00Presumably you'd have to compare large numbers...Presumably you'd have to compare large numbers of traders vs laypeople (or monkeys or random number generators or what have you) to draw the conclusion that traders are simply chancers/gamblers etc. that aren't any better than Joe Average, one isolated comparison means very little (if anything at all) really, sort of like the fact that there are FA cup upsets every year, but over time the results of the big teams vs the small teams are considerably better in favour of the big teamsRockynoreply@blogger.comtag:blogger.com,1999:blog-1905686568472747305.post-39638063030527895412011-01-12T13:14:06.290+00:002011-01-12T13:14:06.290+00:00Hmmmm. It's a bit more complicated than that S...Hmmmm. It's a bit more complicated than that Stephen. You would do well to read 'Fooled by Randomness', by Nassim Nicholas Taleb.<br /><br />I have a pretty low opinion of most fund managers (which is why i don't invest in funds) but just because a fund has performed badly doesn't mean it has been poorly managed. <br /><br />eg A and B have 10,000pounds to save for a pension.<br /><br />A's idea is to spread his money over a wide range of investments (this is essentially what you pay funds to do for you) thus minimising the risk of losing all of it, and increasing the chance that a substantial part of it will do very well.<br /><br />B's idea is to buy about 200 lottery tickets a week. <br /><br />one year later A's portfolio has lost a good deal of its value and B has won the lottery.<br /><br />Would you really say that B's idea had been a sensible one? or that B deserves praise? or that A deserves blame?McDullardhttps://www.blogger.com/profile/10245016966190311940noreply@blogger.comtag:blogger.com,1999:blog-1905686568472747305.post-15074040368131018752011-01-11T22:08:29.426+00:002011-01-11T22:08:29.426+00:00Another experiment to confirm that a dart board or...Another experiment to confirm that a dart board or a monkey is just as good as well in the random market. <br /><br />Just another confirmation how the merchant/investment bankers are overpaid for contributing nothing to the economy.Anonymousnoreply@blogger.com