Category Archives: Risk Management

The Fed Has Not Manipulated the Stock Market

There is widespread misconception that the Fed has manipulated the stock market. No one can manipulate share prices directly without actually transacting in the stock market. I describe a mechanism of stock market manipulation below and I claim that large … Continue reading

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Stock Market Returns Are Almost Never Realized Returns

Unless one is fully invested in a single stock or ETF, portfolio returns depend on allocation. In the case of trading, returns depend in addition on risk parameters. Although this sounds trivial, some economists and bloggers do not seem to understand … Continue reading

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Just Follow The System

It is paradoxical but investor anxiety rises near all-time highs. This may have to do with cognitive biases and specifically hyperbolic discounting, i.e., the tendency to want an immediate payoff. At the same time, when markets are rallying, there is … Continue reading

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Investors May Be Preparing For A Stock Market Rally

Although it appears that the market has started to correct, there is some evidence that investors may be selling overbought low volatility and high yield stocks to raise cash before a market rally.

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Data-Mining Bias Still Drives Wall Street Decisions

This latest article in Yahoo! Finance is an example of how data-mining bias still drives Wall Street decisions.

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Is The Stock Market Irrational? Short Answer: No

Two weeks ago stocks were under pressure and the financial media was predicting chaos from the Brexit vote. The S&P 500 dropped 5.6% in two days. But the market ignored all negative news and rallied 6.5% near all-time highs in the … Continue reading

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Money For Nothin’ And Backtests For Free

Backtests are good for systematic trading and under certain conditions. It makes no sense to use backtests in an effort to analyze current market conditions. Yet, this is done all the time and regrettably by educated people who call themselves … Continue reading

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A Black Box May Be A Good Choice

Some investors and traders will never be satisfied with the type of strategy they use. If they use a strategy from the public domain, then they complain it does not work. If they use a black box, then they complain … Continue reading

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