Value Investing World. I4U News - Daily News and Trends for the Geek Mind. Links for 2012-05-16. The Big Picture. Market folly : hedge fund portfolio tracking, SEC filings. Wonkblog. The Book. Columns and News.
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Currently 0.00/5Rating: 0.0/5 (0 votes)Tesla: Tough Journey AheadCurrently 0.00/5Rating: 0.0/5 (0 votes)Strike While The Iron (BA) Is Hot! Currently 0.00/5Rating: 0.0/5 (0 votes)Natural Grocers Will Look Interesting On Further CorrectionCurrently 4.29/5Rating: 4.3/5 (7 votes) Start With the As? FT Alphaville. Clusterstock. Write-Offs. The Flaws of Finance: James Montier at the CFA Institute. Robert Seawright at Above the Market published his notes from the James Montier presentation at the CFA Institute this week.
The presentation, titled “The Flaws of Finance.” focuses on the trouble with assumptions and models and a regulatory framework that understands neither… From Above the Market: If you give CAPM and VAR to monkeys, they’re going to create a financial crisis. Indeed, I think they just did.Remember that models are abstractions and don’t represent reality — they have clear weaknesses (low beta outperforms high beta).CAPM assumes risk is volatility and ignores liquidity and leverage (and that’s nuts).VAR — like a vest that is 95% bulletproof (fails when you need it).Bad models and bad assumptions tend to replace common sense.Graham — the more abstruse the maths, the more uncertain the results (“complexity to impress”).