4/24: Risk Aversion vs. Loss Aversion:
What is the Big Difference?
Well, they got it wrong. Risk is how much you can lose. It's not an
aversion if you know what you are doing going into an investments
(and universally no one tells you) and the risk aversion means
????. I suppose it might mean how sorry you would feel with losing
$45,000 out of $100,000. But in my terms it means divesting your
self of risk one a threshold meets are certain. About 12% is the
The pro-E.U. Emmanuel Macron appears headed for a
runoff with the far-right Marine Le Pen in the French
Why the headline??? If Le Pen wins France may leave the Euro. Then
more countries will as well. This is a real ugly mess because the
Euro could fall . Russia will look to extend power. China, North
Korea as well. Worldwide recession at about 85%.
this an old article??? Didn;t say but the whole DOL stuff is to
eliminate excess fees
Over 90% of Americans make this 401(k) mistake
Roughly 92% of 401(k) participants are unaware of the fees they pay
in their plans, according to this article on Motley Fool, which
cited a study by NerdWallet. This could mean many of them could lose
a substantial amount of retirement savings, as many 401(k) plans
charge hefty fees
EFM = If employees are NOT aware of that issue- well they are really
behind the eight ball in determining what they should be doing
more concern on TDFs : Boston College
- While nearly 60 percent of new 401(k) participants have
savings in target date funds (TDFs), little research has
looked under the hood of this investment vehicle.
- This analysis uses a unique dataset with extensive
information on the underlying mutual funds that TDFs hold.
- The results show that TDFs:
- often invest in specialized assets (e.g., emerging
markets and real estate);
- charge fees that are only modestly higher than if an
individual investor assembled a similar portfolio on his
- earn returns that are broadly in line with other mutual
all (97%) of consultants recommend target-date funds as the
qualified investment default alternative (QDIA).
EFM- THAT'S WRONG. Read my article above. TDF types are all over
the board. The risk of loss is all over as well. Can just be
terrible for retirees,
Economic Reforms Are Stalling Globally
Then, at the same time. the headline below comes out saying
everything is rosy
recovery is at its strongest since the crisis
and Donald Trump were supposed to bring doom, gloom and trade wars
to the global economy, if not famine and populism-fuelled
EFM- I don't remember being that concerned but I did feel then as
I do now that the party has been going on for too long.
Downside of Managing Downside Risk
Read it- I will debunk it later.
mind in the machine.
More of artificial intelligence below.
The scientific method might be the single most powerful idea humans
have ever had, and progress since the Enlightenment has been simply
astonishing. But we are now at a critical juncture where many of the
systems we need to master are fiendishly complex, from climate
change to macroeconomic issues to Alzheimer’s disease. Whether we
can solve these challenges — and how fast we can get there — will
affect the future wellbeing of billions of people and the
environment we all live in. The problem is that these challenges are
so complex that even the world’s top scientists, clinicians and
engineers can struggle to master all the intricacies necessary to
make the breakthroughs required.
its core, intelligence can be viewed as a process that converts
unstructured information into useful and actionable knowledge.
The algorithms we
work on learn how to master tasks directly from raw experience,
meaning that the knowledge they acquire is ultimately grounded in
some form of sensory reality rather than in abstract symbols
AI must be used responsibly, ethically and to benefit everyone. We
must also continue to be highly cognisant of both the utility and
limitations of AI algorithms. But with rigorous attention to
programs’ capabilities, and more research into the effects of the
quality of the data we use as inputs and the transparency of their
workings, we may find that AI can play a vital role in supporting
all manner of experts by identifying patterns and sources that can
escape human eyes alone.
TO VA Benefits & Long-Term Care
The profile of today’s angry
working-class voter is someone who has found that tickets to
middle-class life have run out because manufacturing jobs they
once could live on have given way to low-paying service jobs.
even many of these service jobs are disappearing. A recent
The Times documented the decline of suburban malls as online
shopping advances. The e-commerce share
of total retail sales has
doubled roughly every six years since 2004, reaching 8.3 percent
at the end of 2016. One result is that employment at retail
outlets has fallen. Department stores and other general
merchandise stores, like supercenters and warehouse clubs, have
been hit especially hard, shedding
89,000 jobs from
November through March.
government needs to effectively
manage inevitable change for
the greater good.
immediate need is to ensure a strong safety net for displaced
workers, including unemployment benefits and continuous health
The bigger challenge is to ensure greater pay and security for jobs
that survive the upheaval and those that are created. Service
workers are poorly paid and have few benefits because of intentional
policy decisions, not impersonal forces.
I don't think that AI can bring us nirvana. It might 'take over'
most functions of our society. With this influx and the changes in
retail etc. more young people will be removed from any type of a
true labor source and cause a social upheaval because they have
become useless. .
Why Employers Should Care About the Cost of Delayed
each individual who cannot retire, the cost averages an extra
$50,000 a year, representing the difference between the salary of
an older worker and hiring a younger person, according to
Prudential. The annual cost across a workforce is an additional
1.0% to 1.5% a year.
EFM= Yet I see article after article showing older workers are
more dependable, smarter, better workers. Maybe it is the cost of
and standard deviation- broken
modern portfolio theory (MPT) pillar that is unquestionably broken
is the use of volatility, specifically standard deviation, as a
measure of risk.
This initial error in MPT’s development is a major contributor to
active investment management underperformance.
the 1950s, academics recognized that hundreds of years of
statistics research thinking could be borrowed to analyze the
performance of investment portfolios — if some of the
definitions could be bent to their aims. Once standard
deviation was transformed into “risk,” the work of analyzing
portfolios could begin and theories could be developed.
Markowitz states, “V (variance) is the average squared deviation
of Y from its expected value. V is a commonly used measure of
dispersion. Also, “We
next consider the rule that the investor does (or should)
consider expected return a desirable thing and variance of return
an undesirable thing. . . . We illustrate geometrically
relations between beliefs and choice of portfolio according to
the ‘expected returns — variance of returns’ rule.”
EFM- the article notes that variance is exactly what an investor
wants- to be able to capture great returns. By the same token,
real life has some major hits due to an unequal variance. But my
position is simply avoid. these hits beyond a 12%.
Markowitz again- “[This rule] assumes that
there is a portfolio which gives both maximum expected return and
minimum variance, and it commends this portfolio to the investor.”
EFM- In real life, current volatility will bounce around a "norm"-
however one wishes to define it. But this is now real life- the
gauge’s- (VIX , volatility index) average level this year
is at its lowest point in its 24-year history. Gee, that is
not possible. It is an impossible occurrence given today's
mess of Trump, North Korea, Russia, Ukraine, GDP, USA debt, Trump
again.and on and on. But I have always noted in this game- things
simply do not have to make sense. Robert Shiller noted that
implication is that stock price changes are largely driven by
something other than changing fundamentals. Volatility is the
result of investors’ collective emotional decisions.
Shiller’s contention has withstood the test of time. Numerous
studies have attempted and failed to dislodge it.
not only does volatility capture both undesirable down price
movements along with desirable up movements, it is mostly driven
by the collective emotions of investors and has little to do
with fundamental risks. Since emotions are transitory
and much of the resulting effect can be diversified away over
time, volatility fails as a risk measure;
Volatility IS a risk- but just one of many. It is NOT risk ipso
facto. Can one get it to work for the real world? Yes, but that
requires an interpretation of as many issues as the human brain
can address with the recognition that risk CANNOT remain static..
So it's not perfect? Agreed- but where are the comments on the
risk questionnaires where no one has a clue to all the human
heuristics and dumb rationalizations entered by consumers and
maintain that since investors enter and exit funds based on
strong short-term upsurges and short-term drawdowns, volatility represents business risk for
the fund. But why should fund business risk be intertwined with
investment risk? There need to be separate measures since
the risk faced by investors and funds is distinctly different.
if volatility as risk is flawed, how do we measure investment
risk? The metric should focus on the chance of permanent loss —
investment value dropping to zero, for example — or the
opportunity cost of underperforming a benchmark.
the Risk of Loss is the best measure- how much the
investor is willing to lose given a buy and hold 'strategy'. One
can easily determine where the client fits in 'conservative,
moderate, aggressive, etc. definitions. No wondering about
artificial intelligence, miscellaneous hubris and
heuristics and the always utilized Ouija Board.
truth is investment risk is complex and
multifaceted, so no single number could suffice, much less an
emotionally driven statistical measure like standard deviation.
have little meaningful insight into measuring risk. This hasn’t
exactly endeared a professor to department colleagues or to some
of his students. In essence, he was saying that the research
on measuring risk conducted at hundreds of academic institutions
over the decades has largely been fruitless.
discipline likes to admit such monumental failure. But this is
where we are in finance today.
OK, you can get a reasonable measure of risk of loss given a
recessionary economy. When the risk of loss is greater than a
correction, then eliminate the risk. The 10% to 15% bar been
valid for decades and I think it will be for some time yet. In any
case, the investor should and can easily circumvent large rages
losses of 2000 (49%) and 2008 (57%). Or just sit there
like a lump and suck up losses that you may never be able to
Working Paper No. 456 (Also Reprint No. r0188)
Issued in February 1980
NBER Program(s): ME
paper will develop the efficient markets model in Section I to
clarify some theoretical questions that may arise in connection
with the inequality (1) and some similar inequalities will be
derived that put limits on the standard deviation of the
innovation in price and the standard deviation of the change in
price. The model is restated in innovation form which allows
better understanding of the limits on stock price volatility
imposed by the model. In particular, this will enable us to see
(Section II) that the standard deviation of p is highest when
information about dividends is revealed smoothly and that if
information is revealed in big lumps occasionally the price series
may have higher kurtosis (fatter tails) but will have lower
variance. The notion expressed by some that earnings rather than
dividend data should be used is discussed in Section III, and a
way of assessing the importance of time variation in real discount
rates is shown in Section IV. The inequalities are compared with
the data in Section V.
Comments and views of some heavy hitters
of low interest rates have bloated stock valuations to a level not
seen since 2000, right before the Nasdaq tumbled 75 percent over
two-plus years. That measure -- the value of the stock market
relative to the size of the economy -- should be “terrifying” to a
Stocks are trading at unsustainable levels. A few traders are
more explicit, predicting a sizable market tumble by the end of
debt -- the money clients borrow from their brokers to purchase
shares -- hit a record $528 billion in February, a
signal to some that enthusiasm for stocks may be overheating.
stocks sit 2 percent below the all-time high set on March 1. The
S&P 500 index is trading at about 22 times earnings, the
highest multiple in almost a decade, goosed by a post-election
and buy back shares. About 30 percent of the jump in the S&P
500 between the third quarter of 2009 and the end of last year was
fueled by buybacks, according to data compiled by Bloomberg
Intelligence. The manager says he has been shorting the market,
expecting as much as a 10 percent correction in U.S. equities this
4/23: From a woman age 92 to one of her nephews,"“Don’t
live this long. Really, don’t do it.”
4/23: USA Facts
USAFacts is a new data-driven portrait of the American population,
our government’s finances, and government’s impact on society. We
are a non-partisan, not-for-profit civic initiative and have no
political agenda or commercial motive. We provide this information
as a free public service and are committed to maintaining and
expanding it in the future
4/23: Felons and insurance
insurance professionals, we often get the question, “Will a
felony conviction result in a “life Sentence” decline when
trying to obtain a life insurance policy?” The short
answer is “yes, no, and maybe so”. The true decision will be
made based upon the details of the conviction.
Those with a
criminal history are immediately considered high-risk. Roughly
one-third of adults in the United States have a criminal record
according to the Department of Justice. The consequences of this
are numerous and far-reaching including the ability to obtain
a great many factors that drive the underwriting of a life
insurance policy. If your client has criminal history, it is
best to disclose it up front. Higher amounts often require a
background check and if a criminal past exists and was not
disclosed, the case may not be seen in the proper light.
There are several reasons that history of felony conviction
results in a higher life insurance premium and a non-preferred
risk class. Many applicants with a history of incarceration
suffer from poor health caused by the stress of jail time and the
poor health care that is received while incarcerated. The
possibility of a contractible disease is also higher amongst the
prison population and there is a much higher likelihood of
substance abuse and addiction. The highest risk of all is the
likelihood of re-incarceration. According to the bureau of
4/20: Well, at least they are not drinking a lot and driving. Then
4/20: VIX is low, low, low
volatility crisis approaches What
gives with Wall Street’s “fear gauge”? The Chicago Board Options
Exchange Volatility Index, or Vix for short, should be reflecting
the potential peril for markets —
4/20: Too much debt
debt binge has left a quarter of US corporate assets
vulnerable to a sudden increase in interest rates with the
ability of companies to cover interest payments at its weakest
since the 2008 financial crisis by one measure, the
International Monetary Fund has warned
If you are not familiar with Kahneman, do some reading on him and
Tversky. Try Kaheman's Thinking, Fast and Slow.
of the common decision-making shortcuts in the business world is
to default to the highest-paid person’s opinion (HIPPO).
Now, the highest-paid person likely receives that compensation for
a reason. Maybe they’ve made superior decisions in the past and
have expertise in the field — which can make this shortcut even
more tempting. But, as Kahneman and others have shown, experts
are fallible. So if we want our organizations to make better
decisions and avoid the HIPPO effect, we need to create a culture
that encourages dissenting opinions.
are three steps to do that:
Hand out some thinking hats.
Thinking Hats, Edward de Bono outlines a process that
encourages groups to consider an issue from six different angles.
He describes the different hats as follows:
White Hat (Facts) considers the information available and what
additional data may be needed.
Red Hat (Feelings) examines how the decision makes the group
feel. What’s the gut reaction?
Black Hat (Caution) plays the devil’s advocate. What could go
Yellow Hat (Benefits) dwells on the positive side. How could the
decision go right?
Green Hat (Creativity) seeks ideas, the more imaginative the
Blue Hat (Manager) sets the goals and plans and directs the
using this The Six Thinking Hats method, if one group member has
always played devil’s advocate or proposed crazy, creative
solutions, the team can no longer take it for granted. What’s
more, the group should rotate the hats so one person isn’t always
in the same role.
beauty of this structure is that the team is free to consider the
various facets of almost every decision. And everyone has
permission to do so.
Make debate a team sport.
way to build a culture that values diverse opinions is for the
HIPPO to model it.
the venture capital firm Andreessen Horowitz, founders Marc
Andreessen and Ben Horowitz routinely trash each other’s ideas and
encourage others to join in. As a guest on The
Tim Ferriss Show, Andreessen explained their process:
[Ben] brings in a deal, I just beat the s— out of him. And I might
think it’s the best idea I’ve ever heard, and I’ll just, like,
trash the c— out of it. And I’ll get everybody else to pile on. .
. . If at the end of that pile-on, the person is still
pounding the table saying ‘No, no, no, this is the thing,’ we’ll
say ‘Okay, we’re all in, we’re all behind you.’ . . . It’s a
disagree-and-commit kind of culture.”
is there unanimous consensus around a decision or investment idea,
but by using this method we can build an environment that
encourages stress testing ideas. At the end of the day, better
decisions should result.
Don’t add too much value.
you are the HIPPO, be careful not to add too much value.
said, “A good plan violently executed now is better than a
perfect plan next week.” For our purposes, this means don’t hold
out for a perfect decision at the cost of diminished execution.
What good is a 90% ideal decision improved to 95% with HIPPO input
if the commitment to execution declines from 100% to 30%?
people are excited about an idea and it’s directionally correct,
let them run with it. Better to have complete buy-in on the
execution than to erode morale in an attempt to marginally improve
the decision. Again, to quote Patton, “Never
tell people how to do things. Tell them what to do and they will
surprise you with their ingenuity.”
methods are distilled from a Re:Think
I recently attended. Hosted by Shane
Parrish and the Farnam
the workshop yielded more value than can be condensed in a single
article, but one of the enduring takeaways was the enormous
positive effect of making incrementally better decisions each day.
• Galina Zapryanova and Anders Christiansen, writing
for Gallup, find evidence that when people
hold “low trust in government and low or static expectations for
their future lives,” support for populist politics tends to surge.
This should add clarity to the never-ending debate over whether
populism is driven by “economic anxiety” or racial resentment. It
can correlate with declining economic prospects or
pre-existing racial animus, but this research suggests it’s more
likely driven by, for example, a racial or religious group
facing a declining level of privilege.
4/19: Insurance is possible
4/19: Basic commentary on disability insurance
Minimizing Corporate Risk with Key Person Disability Insurance
By Joe Russo
Let me pose a simple question. What would happen to your company
if you became disabled and were unable to work for a period of
time? Now I want you to really give this sincere thought and
imagine the possible consequences.
If you are an independent agent or an agency owner, the probable
answer is that you would have to attempt to sell your book of
business quickly or let your staff go and close-up shop. If you
are an employee of a larger brokerage, your inability to
personally manage your accounts could cause great financial
detriment, especially in the short term, to your employers. Take a
moment to realize that your clients, no matter their line of work,
likely face those same potential predicaments. What happens when a
key person to a business becomes disabled? The simple answer is
that the business suffers.
The physical loss of a key employee or employer eventually leads
to the loss of present and future business accounts, the loss of
relationships with important contacts, not to mention the office
workflow issues that would inevitably arise. Additionally,
corporate capital would be allocated to finding a replacement
employee who would then need to be trained and paid an appropriate
salary. The costs of the loss of a key person due to disability
can easily put a company into absolute chaos, both operationally
Businesses need short-term insurance solutions to minimize
corporate risk against the disablement of an owner or key
employee. Key person DI is the answer. Policies provide total and
partial “own occupation” disability benefits after a short waiting
period of usually three or fewer months. Monthly benefits can be
scheduled for payout periods from six to 24 months, allowing for
the insurance to pump much needed cash back to the affected
The insurance proceeds can be used however the powers that be see
fit, and although the premium payments aren’t tax-deductible, the
benefits are paid tax-free. The monthly benefits are meant to
force a temporary corporate renaissance to hire/train a
replacement employee for the progression of the firm or to
economically steady the company for an eventual buy-out.
Key person disability insurance is an integral part of corporate
succession planning and should be every bit as important to your
clientele as life insurance in minimizing business risk.
consistently show that married individuals live longer, they
maintain better health, and they’re happier. Married individuals
also do better financially than single individuals. Research has found that even
after controlling for age, education and other demographics,
married people make 10 to 50 percent more than single people. And
it’s not because financially successful people get married, but
because a healthy marriage between two people who complement each
other naturally leads to financial success (Linda Waite and Maggie
of market expectations for US
inflation have eased to their
lowest levels of the year, reflecting declining oil prices and
doubts over the administration’s timeline for stimulative economic
Bond market expectations for inflation over the next five years have
eased below 1.80 per cent, while those for the next 10 years have
dropped below 1.89 per cent. These are levels not seen since
December and come as annualised US inflation figures for March
slowed more than forecast. Break-even rates, or the inflation
compensation implied by Treasury inflation protected securities, are
also down from recent peaks as investors have faded the prospect of
growth-supporting fiscal measures from the Trump administration and
Congress. Big investors, such as Jeffrey Gundlach, have recently
warned that expectations for an acceleration in US economic growth
and inflation have been too high.
EFM- I thought the growth wa
s too high- though things may change if health care is enacted and
then Trump goes for tax changes
4/19: IMF on Britain
In its latest assessment of prospects for global
growth, published on Tuesday, the Washington-based organisation
predicted that the UK economy will grow this year by 2 per cent,
an increase of 0.5 percentage points from the forecast it made
in January. The IMF also upgraded its UK growth forecast for
next year, from 1.4 per cent to 1.5 per cent.
Before the EU referendum last year, the IMF
forecast that the UK economy would grow 2.2 per cent in 2017.
But it cut the forecast to 1.3 per cent last July, weeks after
the Brexit vote, and downgraded its forecast further, to 1.1 per
cent, in October.
Exercise: Good Medicine for the Brain
Leilani Doty, PhD
physical exercise is important for brain health. Being active is
important whether a person has normal memory and thinking
abilities or has a memory disorder such as a Mild Cognitive
Impairment, early/moderate Alzheimer’s disease or related
progressive memory disorders.
have been measured in older men and women with normal memory who
live independently in the community and are physically active,
even if they start becoming active later in life. Research using
the Folstein Mini-Mental Status Exam, a simple test of memory and
thinking functions, on people with early-stage Alzheimer’s disease
has shown that sedentary (inactive) people have a significant
decrease in their scores when their scores are compared to those
of more active people. A careful review of 10 research studies
found evidence that exercise improves walking and slows the
decline in ADLs (personal care activities of daily living such as
eating, bathing, dressing, etc.) of people who have Alzheimer’s
disease and live in residential care facilities.
That Helps the Brain
A routine that involves 30 to 40 minutes at a time of physical
exercise for 5 days a week improves memory, attention, language
skills, and other thinking functions. However, some research found
improvements in older people who exercised as little as 2 or 3
times a week.
one or a mix of the following four types of exercise seem to be
the most helpful:
- such as moderate walking that works up a light sweat
– 2 or 3 wheel bicycle or on a stationery or exercise bike
training to improve muscle strength - using push-pull exercise
machines in a gym; wide rubber stretch-bands (Sometimes called
resistance bands, they range from easy-highly stretchable to a
firm-heavy-duty stretchable.); or lifting small free weights
Changes in the Brain
As a bonus, regular exercise promotes the release of BDNF
(brain-derived neurotrophic factor) in the brain. BDNF nurtures
the brain cells. You could say that BDNF fertilizes the brain
research project measured the hippocampus, the brain area
responsible for storing short-term memories. Measurements of the
hippocampus took place at the beginning and again at the end of
the study. In the older people who were in the walking-group,
there was a 2% increase in their hippocampus while the comparison
group which only did stretching and toning exercises had a 1.5%
decrease in that area of the brain.
have concluded that routine physical exercise make a significant
difference in brain health, brain function, as well as general
health such as improving muscle and bone strength, reducing (high)
blood pressure, strengthening the heart, increasing the
effectiveness of insulin, helping the GI tract, and, especially
reducing caregiver stress. And it is never too late to start being
active and gaining benefit from physical exercise! A healthier
caregiver can manage much better the ongoing challenges of decline
in a loved one who has a progressive dementia
DIY Modifications for a Dementia-Friendly Home
you caregiving for a loved one with dementia? Does your
loved one share a residence with you? If you answered yes to
both of these questions, you most likely worry about your loved
one’s safety, especially when he or she is alone at home.
You may even feel as though you can never leave your loved
one unsupervised which is a difficult task to balance in the
throes of busy, everyday life. As an occupational therapy
graduate student, I am interested in providing solutions to enable
individuals to remain living in their homes as they age for as
long as possible. Occupational therapists are well-suited to
recommend home modifications given their knowledge and skills to
determine the role the environment plays in an individual’s
ability to perform important daily activities such as self-care
and tasks around the house. Consideration of household
safety is key in order to support independent living in this
particular population of older adults. Fortunately, there
are several creative and affordable strategies available to keep
your loved one with dementia safe as well as more independent in
Strategy # 1: Contrasting Colors
A simple home modification which can be done virtually anywhere to
assist the individual with dementia is incorporating contrasting
colors to identify household items against their background with
greater ease. For instance, caregivers could consider
changing the following within the loved one’s home:
Š Change the light switch plate to a bold color which will
sharply contrast against the current color of the wall to
highlight its location.
Š Boldly paint hand rails, for example red, to better
indicate their location near staircases and promote the loved one
with dementia to actually use the rail for support while ascending
Š Select contrasting dishware colors to help the individual
during meal time.
Š Paint grab bars in the bathroom to sharply contrast
against the bathtub or shower as well as the color of the wall
near the toilet.
Strategy #2: Memory Aids
Another simple modification for caregivers to consider is labeling
household items with pictures to serve as helpful memory aids.
An example could be labeling the cupboard doors or dresser
drawers with pictures of the items kept inside. Depending on the
severity of the loved one’s condition, picture aids can also be
incorporated in frequently used rooms. For instance, picture
aids in the bathroom can serve as detailed reminders of an
activity’s sequence such as handwashing. Memory aids can
also include several strategically located message boards around
the home such as erasable, white boards. Message boards can
depict the loved one with dementia’s schedule, the caregiver’s
schedule as well as pertinent contact and emergency
In addition, caregivers can ensure the living space is uncluttered
and well-lit which is practical for all homes and residents.
Clutter can be very overwhelming for individuals with dementia so
try to pare down and simplify the surroundings. All of these
suggestions can be done on a low budget without professional
assistance so it truly is a DIY project for a rainy
afternoon. Home modifications can make a significant
difference in the lives of older adults with dementia as these
solutions promote aging in place, or in one’s home, rather than
placement in a long-term care facility. Caregivers can find
comfort in knowing their loved ones are better able to safely
navigate and perform tasks around the home as well as experience
less confusion and frustration throughout the day.
Intelligence by Will Knight
A fascinating article "explaining" AI will impact
everyone, everyday and possible every minute. And maybe the
programmer will have little clue to what is going on since the
computer will make all the end results by itself. Can financial
planning end up that way?? Possibly. Anyway it is not that technical
and is necessary for anyone that has a lifetime in front of
intelligence hasn’t always been this way. From the outset, there
were two schools of thought regarding how understandable, or
explainable, AI ought to be. Many thought it made the most sense
to build machines that reasoned according to rules and logic,
making their inner workings transparent to anyone who cared to
examine some code. Others felt that intelligence would more easily
emerge if machines took inspiration from biology, and learned by
observing and experiencing. This meant turning computer
programming on its head. Instead of a programmer writing the
commands to solve a problem, the program generates its own
algorithm based on example data and a desired output. The
machine-learning techniques that would later evolve into today’s
most powerful AI systems followed the latter path: the machine
essentially programs itself.
The underlying cause of all cases of cerebral palsy is damage that
disrupts the brain’s development. What causes this damage varies by
individual and in some cases may not be known. Learn more about the
factors that can cause early brain damage and cerebral palsy, like
maternal infections or birth injuries, so that you can take steps to
gay marriage by state. It' interactive by the NYT
that active managers’ performance can vary based on market cycles,
the newly available 15-year data tells a more stable narrative,"
said the report. "Over the 15-year period ending Dec. 2016, 92.15%
of large-cap, 95.4% of mid-cap, and 93.21% of small-cap managers
trailed their respective benchmarks."
disappear at a significant rate," . "Over the 15-year period, more
than 58% of domestic equity funds were either merged or
liquidated. Similarly, almost 52% of global/international equity
funds and 49% of fixed income funds were merged or liquidated."
the Relationship between Skill and Overconfidence
Feld, Jan (Victoria
University of Wellington) ; Sauermann, Jan (SOFI,
Stockholm University) ; de Grip, Andries
(ROA, Maastricht University)
Dunning–Kruger effect states that low performers vastly
overestimate their performance while high performers
more accurately assess their performance. Researchers
usually interpret this empirical pattern as evidence
that the low skilled are vastly overconfident while the
high skilled are more accurate in assessing their skill.
However, measurement error alone can lead to a negative
relationship between performance and overestimation,
even if skill and overconfidence are unrelated. To
clarify the role of measurement error, we restate the
Dunning–Kruger effect in terms of skill and
overconfidence. We show that we can correct for bias
caused by measurement error with an instrumental
variable approach that uses a second performance as
instrument. We then estimate the Dunning–Kruger effect
in the context of the exam grade predictions of
economics students, using their grade point average as
an instrument for their exam grade. Our results show
that the unskilled are more overconfident than the
skilled. However, as we predict in our methodological
discussion, this relationship is significantly weaker
than ordinary least squares estimates suggest.
overconfidence, judgment error, measurement error,
and psychology. The framing of decisions
the Theory of Rational Decision Making the
psychological aspects are set aside. This contribution
seeks to point out the relevance of psychology into
economic decisions. The essay treats the "framing
of decisions", which is a pillar of Kahneman's
behavioral theory. Framing must be considered a special
case of the more general phenomenon of dependency from
the representation. The best-known risky choice-framing
problem, i.e. the "Asian Disease Problem", is shown
where an essential aspect of rationality: invariance, is
violated. In addition, the contribution explains
Kahneman and Tversky's Prospect Theory and illustrates
their value function. Finally, it discusses the
reversals of preference in framing and framing of
contingencies. The framing manipulation is viewed as a
public tool for influencing the decision maker's private
framing of the problem in terms of gains or losses,
which determines the decision maker's evaluation of the
options. In conclusion, the psychology of choice is
relevant both for the descriptive question of how
decisions are made and for the normative question of how
decisions ought to be made.
Behavioral Economics; Framing of
Decisions; Prospect Theory; Daniel Kahneman.
D01 D03 D81
the mutual fund theorem: the risk portfolio as a
Tenani, Paulo Sérgio
Mutual Fund Theorem is an elegant way of describing how
investors with different attitudes towards risk should
construct their portfolios. It is, however, often
misinterpreted. This paper revisits the topic by defining
the Risk Portfolio as a self-financed tactical overlay
portfolio in which all the overweight and underweight
positions cancel each other out. In this sense no net
resources are ever allocated to the Risk Portfolio and
all the investment is allocated to the Minimum
Variance Portfolio. Under these circumstances the
Mutual Fund Theorem implies that the ratio of Bonds to
Stocks in the Total Portfolio would depend on investoręs
risk aversion; as it is actually observed in practice.
The paper also argues that the Asset Allocation
puzzle, as traditionally stated in the literature,
only arises because of a misconception about the “the
facto” definition of the Risk Portfolio.