Category Archives: Quantitative Methods

Industry Ranks May 2014

My main industry model is illustrated in the graphic. Green industries are cold. Red industries are hot. If you like to play momentum, look at the red zone, and ask the question, “Where are trends under-discounted?” Price momentum tends to persist, but look for areas where it might be even better in the near term. […]

Book Review: The 52-Week Low Formula

I usually don’t like reviewing books that say, “Follow this formula, and you will make lotsa money.  Thus it was with some hesitance that I requested this book.  I did it partly off of Tweedy, Browne’s study, which is aptly titled, “What Has Worked in Investing.”  For those reading at Amazon, Google “Tweedy Browne What […]

An Alternative to the Efficient Markets Hypothesis

I read an article today, The Fallibility of the Efficient Market Theory: A New Paradigm.   Good article, made me look through a major article cited: An Institutional Theory of Momentum and Reversal. The former article explains in basic terms what the authors have illustrated.  The latter article, provides all of the complex math.  I get 50%+ of […]

Yet Another Letter from a Reader

I get a lot of interesting letters — here is another one: First, let me say how much I appreciate your blog. I started my career in sellside research covering life insurers (after interning in insurance M&A). Your posts on insurance investing were invaluable in developing my understanding of the industry. My superiors did not […]

The Rules, Part LVIII

Can contingent claims theory for bond defaults be done on a cash flow/liquidity basis?  KMV-type models seem to fail on severely distressed bonds that have time to breathe and repair. We’re getting close to the end of this series, and I am scraping the bottom of the barrel.  As with most aspects of life, the […]

On Finding Neglected Companies

While at RealMoney, I wrote a short series on data-mining.  Copies of the articles are here: (one, two). I enjoyed writing them, and the most pleasant surprise was the favorable email from readers and fellow columnists. As a follow up, on April 13th, 2005, I wrote an article on analyst coverage — and neglect. Today, […]

On Emergent Phenomena

How do you deal with a risk that has never been seen before?  I’m going to focus on financial risks here, but clever people can generalize to other classes of human risk, like war and terrorism. By “emergent phenomena” I mean what happens when people act as a group pursuing the same strategy.  One person […]

Why are Pensions so Messed Up

A few days ago, I was reading Felix Salmon’s piece Pension politics.  (Nice title, the type that Tadas likes — the shorter the better.)  I wrote a short response in the comments, largely agreeing with Felix.  Here it is: Here are the facts: 1) DB pension funding accounting rules are more liberal than life insurance […]

Industry Ranks February 2014

My main industry model is illustrated in the graphic. Green industries are cold. Red industries are hot. If you like to play momentum, look at the red zone, and ask the question, “Where are trends under-discounted?” Price momentum tends to persist, but look for areas where it might be even better in the near term. […]