Investing

Ed Thorp on Kelly Criterion

(Excerpt from A Man for All Markets by Ed Thorp) Kelly’s criterion is not limited to two-value payoffs but applies generally to any gambling or investing situation in which the probabilities are known or can be...

September 19, 2019| Investing, Kelly Criterion, Nonlinearity Read More

4 ways to beat the market according to Ed Thorp

(Extracted from A Man for All Markets by Ed Thorp) Our portrait of real markets tells us what it takes to beat the market. Any of these can do it: 1. Get good information early. How do you know if your information...

September 19, 2019| Investing Read More

Stock market is not Gaussian

(Extracted from A Man for All Markets by Ed Thorp) The defect of VaR alone is that it doesn’t fully account for the worst 5 percent of expected cases. But these extreme events are where ruin is to be found. It’s...

September 19, 2019| Investing, Nonlinearity Read More

Size of wins matters, not frequency of wins

(Extracted from Fooled by Randomness by Nassim Taleb) The best description of my lifelong business in the market is “skewed bets,” that is, I try to benefit from rare events, events that do not tend to repeat...

September 19, 2019| Investing, Nonlinearity Read More

Definition of blowup

(Extracted from Fooled by Randomness by Nassim Taleb) The blowup, I will repeat, is different from merely incurring a monetary loss; it is losing money when one does not believe that such fact is possible at all. There...

September 19, 2019| Investing Read More

For value investing to work, it has to stop working sometimes

(Extracted from Why Value Investing Works on safalniveshak.com) The fact that the value approach doesn’t work over periods of time is precisely the reason why it continues to work over the long term....

September 18, 2019| Inversion, Investing Read More

Persevere for nonlinear effects

(Extracted from Fooled by Randomness by Nassim Taleb) Our brain is not cut out for nonlinearities. People think that if, say, two variables are causally linked, then a steady input in one variable should always...

September 15, 2019| Investing, Nonlinearity Read More

Luck alone can create successful fund managers

(Extracted from Fooled by Randomness by Nassim Taleb) We create a cohort that is composed exclusively of incompetent managers. We will define an incompetent manager as someone who has a negative expected return,...

September 15, 2019| Investing, Randomness Read More

Luck factor increases with sample size

(Excerpt from Fooled by Randomness by Nassim Taleb) The initial sample size matters greatly. If there are five monkeys in the game, I would be rather impressed with the Iliad writer, to the point of suspecting him to...

September 14, 2019| Investing, Randomness, Survivorship Bias Read More

Nassim Taleb invests mainly in treasuries, owns no stocks

(Extracted from Fooled by Randomness by Nassim Taleb) There is another reason why Nero is not as rich as others in his situation. His skepticism does not allow him to invest any of his own funds outside of treasury...

September 8, 2019| Investing Read More

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