Every metric is designed to break down, unless it’s a complex metric. Active share, a metric pioneered by Martijn Cremers and Antti Petajisto, is widely regarded as a hallmark of evaluating active management. The metric quantifies the proportion of a portfolio's holdings that differs from its benchmark index. It serves as a key indicator of how actively managed a portfolio is, with higher active share values indicating greater deviation from the benchmark. If you have high active share you are an active manager, if you are low active share, your process is passive. And if your process is passive, you are merely replicating the benchmark, you are not designed to deliver alpha.
The two sequences of numbers start flying off the spreadsheet, like two fighting snakes, out of the screen into my throat, choking me. I woke up. This was not the first time I had nightmares about my clunky spreadsheet, but the dual sequences dancing together, was a first. My brain was engaged with a special price spread called Basis, which indicated the cost the market was willing to pay for today’s Index value in the future. The problem was that unlike the textbook which suggested positive time value of money, the Index Futures of India were always quoted below the Nifty 50 Index, the leading Index of India, suggesting that borrowing in the Future was cheaper than buying in the present. The markets were doing exactly the opposite of what was prescribed in the textbook, causing me nightmares. Under these weird markets, I started my Capital Market Research Journey with an Indian spread, Basis, as India’s first derivatives analyst on the 9th of June 2000.
Your write up, "The 'it' in AI models is the dataset," offers a profound insight into the essence of AI and machine learning, highlighting the pivotal role of datasets in determining AI behavior. Your observation that different AI models converge towards similar outputs when trained on identical datasets is a striking reminder of the fundamental principle that underlies AI: the data it learns from shapes its understanding and capabilities.
Automation is real. The numbers below can increase to 30% and maybe more in under a decade. In the world where machines are more productive than humans, the educated will need employment. In this impending world, one may wonder the future of work. I believe the world is becoming one big gig economy, centred around data alternative assets aka data alts.
You don’t wake up one day and decide to solve the 100-year-old stock market puzzle and end up creating Modern Science. Some puzzles unravel in mysterious ways and all they need is a sense of purpose, grit, coincidences, and a lot of faith in randomness.
We have a beautiful line of pine trees offering camouflage to our home in the heart of suburban Toronto. This sanctuary is a haven for Robins, Blue Jays, Cardinals, Finches, sparrows, occasional Magpies, and of course, energetic squirrels, rabbits, naughty raccoons, skunks, and fearless beavers who are not camera-shy and sometimes work tirelessly in broad daylight. This small sanctuary facilitates easier conversations with Ivy, my 6-year-old. A few days back, as a Robin perched under one of the snow-capped bristlecones and flew into the L-shaped large glass window frame, it was as if a high-definition film came to life. In that quiet moment, it seemed the Robin was pondering her big decision: whether to leave for her annual migration or stay. The reluctant snow and warmer winter seemed to make life both easier and more difficult for Robin at the same time. Easier because it could avoid the long flight, yet more difficult because the seasonal anomalies required adaptability and thought.
Once upon a time, in the bustling heart of Toronto, there lived a man who had recently moved into his first home with his family. It was a dream come true, a symbol of hope and new beginnings. However, amidst the joy, he found himself grappling with an unexpected challenge - his own anger.
This is my conversation with ChatGPT, asking it to explain, why it was irresponsible, when it came to Investing.
It was sometime in 1995 when I first saw the pink papers in Gupta uncle’s house, it was instant love. Crisp, elegant, typography, still smelling of fresh ink on pressed paper. Gupta uncle as we called him was always kind to me, lending me those papers, as I used to relish them, in awe of this work of art. But what intrigued me most was the op-ed section, with this girl sketched on the center of the page and the author speaking about labor economics and the future of women. The power of words and the subject of economics all framed in the pink papers made a surreal dream of success. Could, I ever publish an editorial in that pink paper? Could I be the economist who could sketch that girl? I had no idea then about the art section and the gifted illustrators working in media. And how writing and art were two separate skills.
The bright light tore through the thick wood-paneled grilled window, blurring the borders, like a painting with a million white rays coming out of a rectangular-shaped fissure. The chip-studded Terrazo floor underneath us was still cool from the previous night and would soon become tepid warm as the sun rays left the window and moved higher and hotter. It was hard not to appreciate the setting, the light, the ancient Egyptian mosaic floor, sitting next to Dad, both of us huddling around the rectangular lighted frame, sitting in a chokdi (the Indian way to sit on the floor, to meditate, to eat, or to study) and anticipation for Mom to finish making the aaloo paranthas, my favorite Sunday breakfast. I was 10 years old, in a perfect quantum state of absorption, to whatever my Dad was going to teach me that morning.
In "How AI Resolved Your Wealth Problem! And the S&P500 Myth," the presenter takes the participants on an enlightening journey through the realms of wealth management, the history of science, mechanism thinking, and artificial intelligence. This five part lecture series boldly challenges traditional investment practices, presenting an in-depth exploration of how AI can effectively address the intricate challenges and inefficiencies inherent in conventional approaches, particularly within the context of the S&P 500 and other benchmark indices. The book is structured into 15 sections, including Difficulty, Legacy, Dependency, Inaccuracy, Recovery, Activity, Mediocrity, Aristocracy, Inadequacy, (Ir)relevancy, Peculiarity, Probability, Entropy, Universality, and Transcendency.
We embarked on a tram ride in Manastur, a suburb of Cluj, a city with a 2500-year-old Roman history, destined for the city center. The tram itself was a rickety contraption, with doors opening and closing abruptly, giving passengers mere seconds to hop on or off. Initially, this was quite unnerving, but it soon turned into a thrilling game. We began to relish the swaying, jolting, and frequent stops. The tram tracks stretched between Central Park and the river, offering views of nature on both sides, framed by uninspiring communist-era apartment buildings lacking any architectural charm. However, the river flowing through the city carried a magnetic energy that breathed life into the historic city, adorned with old Baroque structures and magnificent edifices.
In a world where the allure of wealth and the stock market was an enduring passion, two young boys embarked on journeys that would forever alter the landscape of financial history. Their stories unfold in different eras and places, but they are inextricably linked by a single, enigmatic entity – an unassailable index.
In the serene realm of passive asset management, a tempest is brewing, and with each passing day, the turmoil intensifies. From the ascent of interest rates to the first-ever outflows, from stagnant equity markets to the cancellation of robo advisor acquisition deals, and even the demise and closure of some robo advisors - it's a world rife with chaos. Add to this the woes of a 33% drop in revenue, the cessation of business operations in China, tardiness in conquering Europe, and the shift towards active strategies, it's apparent that the USD 30 trillion passive asset management industry, particularly its top three players, is navigating tumultuous waters despite the growing popularity of passive investing.
When I began studying cycles back in 2007, the fact that history repeats itself and that every generation experiences its war troubled me so much that I spent an undue amount of time anticipating the timeframe. The prospect of an international war occurring in the 2020s brought back vivid memories of stories I heard as a child about blackened windows, sirens, and lights being turned off in Delhi, a stark reality.
In the world of investment management, there's a widespread problem of mediocre results. This isn't because passive investment strategies are brilliant, but rather because the academic understanding of a statistical concept called "mean reversion" has been distorted. Some psychologists and economists have won Nobel prizes by misusing the concept in their theories, which has led to a mistaken belief that active investment managers are generally incompetent.
Frederick Phillips Brooks' seminal work, "The Mythical Man-Month," has transcended time and now requires a fresh edition as we delve into the era of Mysterious Machine Month. While Brooks, a Turing Award winner, isn't here to guide us through this transition, the landscape has evolved significantly. Machines differ fundamentally from humans in their approach to work; they are devoid of procrastination and exhibit a consistently high level of productivity, making them indispensable in the world of technology.
In the heart of the village, the legend of the red and blue sacks lived on, carried by the winds of time. The tale of these unassuming sacks had transcended the boundaries of the mountain, reaching far and wide. It was a story of resilience, adaptability, and the unwavering spirit to recover—a story that the villagers still held close to their hearts.
Momentum is the most important investing factor today not only because it features in the market capitalized weighted Indexes, which are designed to make the big bigger but also as the king of the factor zoo that drives factor investing today. Momentum is understood as a statistical factor but it’s loosely defined like many other statistical factors. The author is not aware of published work seeking commonality in statistical factors. The search for one-size-fits-all factors though seems like a hypothetical study, but modern science thinking offers an opportunity to not only ask what is momentum. But also redefine the factor and see its commonality with a universal dynamic probability factor. The study delves into the history of the momentum factor to explore its evolution as a component of a probabilistic mechanism that explains how momentum does not work alone but transforms into an inverse momentum and other statistical factors. The paper studies historical momentum crashes to highlight the inseparability of factors if they are reviewed as part of a probabilistic mechanism.
On the occasion of the 50th anniversary of the prominent benchmark that symbolizes India's economic prowess, the National Stock Exchange of India (NSE) unveiled the "Nifty 50 Stock of the Nation" report. This insightful report sheds light on the intricacies of Nifty, a key player in the vast $3.6 trillion Indian Stock Market. Its timing couldn't be more perfect, as it serves as an educational tool for both individual and institutional investors. The report underscores a critical fact: despite the apparent stability, investing a substantial 65% of resources into just three out of the 18 sectors paints a picture of concentration, not diversification, which inevitably translates to heightened risk.
