Acciones y Tendencias

Una nota de media mañana. Dinamic Hedge tiene un enumerativo post sobre -ciertas- tendencias que se observan en el mercado de acciones de USA.

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Mutual Fund Monday: Mondays are considered a favored day for institutional buying.  I’m not sure if there is any hard evidence for this, but it is certainly an observable phenomenon in the last couple years.  I rarely fade an into Monday rallies.

4-Year Presidential Cycle: This is a long-term seasonality play that could be categorized under market cycles.  I pay very close attention to this one.  The major premise being that the second year of a presidential cycle can produce a meaningful bottom in the stock market.  The fourth quarter of the second year of a presidency typically produces large gains and the third year produces positive gains in all quarters.  This is in effect right now.

2-Year Tech Product Cycle: This one can also be categorized as more of a market cycle rather than seasonality.  Technology drives productivity.  Semiconductors roughly double their computational capacity every 18 months.   This continuous advancement of computational capacity drives new innovative product cycles. This relentless product cycle translates into roughly two-year observable market phenomenon where technology stocks create relative highs every two years.  Take a look at a chart of the Philadelphia Semiconductor Index SOX, to see what I mean.

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Si desea profundizarse en el tema: Efectos Calendarios

Paper: Burbujas y el hecho de ser credulo

Bubbles, gullibility, and other challenges for economics, psychology, sociology, and information sciences

Gullibility is the principal cause of bubbles. Investors and the general public get snared by a “beautiful illusion” and throw caution to the wind. Attempts to identify and control bubbles are complicated by the fact that the authorities who might naturally be expected to take action have often (especially in recent years) been among the most gullible, and were cheerleaders for the exuberant behavior. Hence what is needed is an objective measure of gullibility.

This paper argues that it should be possible to develop such a measure. Examples demonstrate, contrary to the efficient market dogma, that in some manias, even top business and technology leaders fall prey to collective hallucinations and become irrational in objective terms. During the Internet bubble, for example, large classes of them first became unable to comprehend compound interest, and then lost even the ability to do simple arithmetic, to the point of not being able to distinguish 2 from 10. This phenomenon, together with advances in analysis of social networks and related areas, points to possible ways to develop objective and quantitative tools for measuring gullibility and other aspects of human behavior implicated in bubbles. It cannot be expected to infallibly detect all destructive bubbles, and may trigger false alarms, but it ought to alert observers to periods where collective investment behavior is becoming irrational.

The proposed gullibility index might help in developing realistic economic models. It should also assist in illuminating and guiding decision–making.

Link al Paper

El problema de Linda, Behavioral Finance en perspectiva

Psy-Fi Blog, tiene un post donde pone el problema de Linda en perspectiva; después ahonda con la critica. Me quedo con el comienzo.

It’s the (in)famous Linda problem:

Linda is 31 years old, single, outspoken and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in antinuclear demonstrations. Which of these two alternatives is more probable?

(a) Linda is a bank teller.
(b) Linda is a bank teller and is active in the feminist movement.

Most subjects choose (b) and are informed that they’re irrational because the conjunction of two events – Linda is a bank teller and active in the feminist movement – is less likely than her just being a bank teller, regardless of her leisure interests. This is known as the conjunction fallacy. Unfortunately there’s a teensy little problem with this finding.

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Here’s a variation of the Linda problem carried out by Gigerenzer and colleagues:

Linda is 31 years old, single, outspoken and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in antinuclear demonstrations.

There are 100 people who fit the description above. How many of them are:

(a) bank tellers
(b) bank tellers and active in the feminist movement

Guess what happens to the results? Yep, the conjunction fallacy disappears – far more participants now choose (a) than (b). Something odd and deep and important is happening that the mainstream of behavioural finance research is completely failing to understand.

Paper: analizando a los inversores

Behavioral Portfolio Analysis of Individual Investors

Abstract:
Existing studies on individual investors’ decision-making often rely on observable socio-demographic variables to proxy for underlying psychological processes that drive investment choices. Doing so implicitly ignores the latent heterogeneity amongst investors in terms of their preferences and beliefs that form the underlying drivers of their behavior. To gain a better understanding of the relations among individual investors’ decision-making, the processes leading to these decisions, and investment performance, this paper analyzes how systematic differences in investors’ investment objectives and strategies impact the portfolios they select and the returns they earn. Based on recent findings from behavioral finance we develop hypotheses which are tested using a combination of transaction and survey data involving a large sample of online brokerage clients. In line with our expectations, we find that investors driven by objectives related to speculation have higher aspirations and turnover, take more risk, judge themselves to be more advanced, and underperform relative to investors driven by the need to build a financial buffer or save for retirement. Somewhat to our surprise, we find that investors who rely on fundamental analysis have higher aspirations and turnover, take more risks, are more overconfident, and outperform investors who rely on technical analysis. Our findings provide support for the behavioral approach to portfolio theory and shed new light on the traditional approach to portfolio theory.

Link al Paper

Paper: Una Critica a Behavioral Finance

Models, Reflexivity, and Systemic Risk: A Critique of Behavioral Finance

Abstract:
This study considers the problem of systemic risk in financial markets dominated by models. Existing approaches debate the relative importance of financial models versus the biases introduced by social cues. In place of models versus social cues, our alternative account examines the interaction between models and social cues. Our ethnographic observations in the derivatives trading room of a major investment bank demonstrate that systemic risk arises from the precautionary efforts of traders. Traders check for errors in their own calculations by using models in reverse that represent the positions of their anonymous and impersonal rivals. We thus find traders modeling social cues. Such reflexive use of models leverages the dissonance among rival traders, but in the absence of requisite diversity such dissonance turns to resonance. If enough traders overlook a key issue, their mistake will reverberate to others. The resulting cognitive lock-in leads to arbitrage disasters. The trading room we observed suffered one major such disaster. Our analysis challenges behavioral accounts of systemic risk by locating its roots in the socio-technical mechanisms of reflexivity rather than individual biases.

Link al Paper

Articulo de donde obtuve el paper.

Paper: Inversores e información asimetrica

Do Individual Investors Have Asymmetric Information Based on Work Experience?

Abstract:     
Using a novel dataset covering all individual investors’ stock market transactions in Norway over a 10-year period, we analyze whether individual investors have a preference for professionally close stocks, and whether they make an excess return on such investments. After excluding own-company and previous employer stock, investors hold on average 11 % of their portfolio in stocks within their two-digit industry of employment. Given the poor hedging properties of professionally close stocks, one would expect such investments to be associated with asymmetric information and abnormally high returns. In contrast, all our estimates of abnormal returns are negative, in many cases statistically significant. Overconfidence seems the most likely explanation for why individuals excessively trade in professionally close stocks.

Link al Paper

Paper: NFL y eficiencia de mercado

The Loser’s Curse: Overconfidence vs. Market Efficiency in the National Football League Draft

Abstract:
A question of increasing interest to researchers in a variety of fields is whether the biases found in judgment and decision making research remain present in contexts in which experienced participants face strong economic incentives. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which monetary stakes are exceedingly high and the opportunities for learning are rich. It is also a domain in which multiple psychological factors suggest teams may overvalue the chance to pick early in the draft. Using archival data on draft-day trades, player performance and compensation, we compare the market value of draft picks with the surplus value to teams provided by the drafted players. We find that top draft picks are overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research.

Link al Paper

San Petersburgo, paradoja

El Psy-Fi Blog tiene una entrada interesante donde arremete contra un concepto medular de la Economia, la Utilidad.

Rescato, los párrafos dedicados a la Paradoja de San Petersburgo -cortesia de Nicolas Bernoulli- y a los comienzos de la probabilidad con Pascal y Fermat.

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Then Nicholas Bernoulli came up with the St. Petersburg Paradox, a position that stands in stark contradiction to Pascal’s Wager, arguing that there is no limit to the amount you should be prepared to gamble in quest of a greater fortune. The paradox, simply stated, envisages two gamblers betting on the toss of a coin. On the first toss if it lands on tails the winner gets $2, on the second a tail yields $4, on the third $8 and so on, forever. If you calculate the risk weighted probabilities your likely winnings increase by a dollar with every tail tossed, all the way to infinity.

Thus what the St. Petersburg Paradox argues is that the value to the gambler of the coin flipping game is infinite: it’s like owning a cash machine that continually replenishes itself. However, the paradox goes further – it asks that, if the value of the gamble is infinite what is the maximum stake that a rational person should be willing to bet on it? How much money is it worth paying for a cash machine that never runs out of money? The rational answer is, of course, that there is no maximum: any amount is less than the value of the machine.

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En el post, se cita el siguiente trabajo, Moral Impossibility in the PetersburgParadox: A Literature Survey andExperimental Evidence

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Comentario al Margen: en un post más reciente del Psy-Fi Blog, donde lamentablemente habla de la Economía como una pseudo-ciencia (me hizo acordar a Mario Bunge hablando del psicoanálisis), se cita un interesante paper sobre el uso y abuso del termino racionalidad por parte de los economistas. Rationality in Economics

Paper: Portfolio no a la Markowitz

Behavioral Portfolio Theory

Abstract

We develop a positive behavioral portfolio theory and explore its implications for portfolio construction and security design. Portfolios within the behavioral framework resemble layered pyramids. Layers are associated with distinct goals and covariances between layers are overlooked. We explore a simple two-layer portfolio. The downside protection layer is designed to prevent financial disaster. The upside potential layer is designed for a shot at becoming rich. Behavioral portfolio theory has predictions that are distinct from those of meanvariance portfolio theory. In particular, behavioral portfolio theory is consistent with the reluctance to have short and margined positions, an inverse relation between the bond/stock ratio and portfolio riskiness, the existence of the home bias, the use of labels such as “growth” and “income,” the preference for securities with floors on returns, and the purchase of lottery tickets.

Link al Paper

números preferidos

The Psy-Fi Blog tiene un post sobre como se reflejan en el mercado financiero nuestras preferencias (o sesgos) por ciertos números redondos. Un buen compendio sobre el tema.

Quite why this happens is a source of much debate, although the main theory is that it’s something to do with our cognitive limitations. Perhaps it’s a retrieval problem – the easy availability of round numbers to our mental processes makes them attractive. Perhaps it’s an anchoring problem, where investors unconsciously anchor on easily available round numbers.

Aca estan los papers citados en la nota:

Round Numbers and Securities Returns

Culture and Stock Price Clustering: Evidence from The Peoples’ Republic of China

Price Clustering and Natural Resistance Points in the Dutch Stock Market: A Natural Experiment