tag:blogger.com,1999:blog-7905515.post633121095710006355..comments2024-02-17T01:10:14.076-06:00Comments on Falkenblog: When A Stop-Loss Makes SenseEric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-7905515.post-42124209236756243762011-02-20T21:45:10.151-06:002011-02-20T21:45:10.151-06:00I agree to you. Stop loss is just a myth, nothing ...I agree to you. Stop loss is just a myth, nothing more.HYIP monitorhttp://www.hyipdata.com/noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-12158872770779891422011-02-18T11:34:44.674-06:002011-02-18T11:34:44.674-06:00J -- that's not right. You never propose to th...J -- that's not right. You <i>never</i> propose to the first 37 in that thought experiment. You go on dates with them simply for a comparison to the next 63.Nic Smithhttp://nic.dreamhost.com/noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-1293128029284748682011-02-17T17:12:56.842-06:002011-02-17T17:12:56.842-06:00What should I read after reading, the newest editi...What should I read after reading, the newest edition of, "A Random Walk Down Wall Street?" <br /><br />The book was good and I think it'll help a novice investor like myself save for retirement, but I've seen some more advanced books out there that claim that valuation can actually be done with predictive accuracy (Peter Stimes) and your book claiming that alpha can actually be found. Malkiel argues that alpha is essentially zero since the markets are mostly efficient, or at least efficient enough that professional money managers can't beat them on a consistent basis. Malkiel is also sympathetic to Benjamin Graham-style security analysis but says that it tends not to have much predictive value. I think Stimes argues otherwise.<br /><br />Anyways, I need to read the next investing book after Malkiel's, which I read per your suggestion. I think I will probably just take his suggestion to purchase index funds in asset categories that are as uncorrelated as possible. I'm not quite through that part of the book.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-33662197226317363762011-02-17T04:44:12.024-06:002011-02-17T04:44:12.024-06:00The optimal dating strategy you mention assumes th...The optimal dating strategy you mention assumes that all 37 girls you dated during the last three years are still waiting for your decision. May be I didnt understand the idea. Anyway, since the girls are playing the same game, the dating strategy is not optimal. Your "optimal" girl has many chances better than you and may not be available for long. <br /><br />People think that reality is following cold probability rules when it is malignantly playing against you.Jhttps://www.blogger.com/profile/05676167615981895061noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-89460894039313232542011-02-16T23:23:28.084-06:002011-02-16T23:23:28.084-06:00I thought this was a very good post. Honestly spen...I thought this was a very good post. Honestly spent over an hour just thinking about optimal stopping problems.<br /><br />I was wondering how to actually implement something like this in practice. For instance, assume you have some prior distribution and some forecast distribution over a specific time horizon that together you use to create a portfolio. I assume you blend the prior and the forecast distribution into a final distribution with some confidence. Stopping in this sense could be setting the confidence in the forecast distribution equal to 0%. However, the prior distribution and the forecast distribution may change often and this change may occur before the time horizon has been reached. This means that, in practice, it would not make sense to think of it like flipping a coin over and over to determine whether it is fair. The relevant distribution is changing as you throw it and you may not even see the final result once, let alone watch it a bunch of times.<br /><br />Perhaps a better way to think about the optimal stopping strategy would be to form a portfolio based on your forecast distribution (hard to say whether this should be 100% confidence in the forecast distribution or the optimal confidence with just these two distributions, you may have n others) and regress the returns of it against the returns of the portfolio formed from your prior to get the alpha over some (possibly short) history. If there is greater than a 95%/99% probability that the alpha of the forecast portfolio is less than 0% (or some minimum bound), then you would set the confidence in that distribution equal to 0%. Since there are only two distributions here, then you would set the prior to 100%, but if you are looking at more than one potential forecast distribution, then you may need to recalculate the confidences in the other distributions with these ones fixed at 0%. Then when you optimize you can incorporate transaction costs. If costs are high, then you still might retain some exposure to the above portfolio.Johnhttps://www.blogger.com/profile/01457388998903348000noreply@blogger.com