The best analogy of the day

I'm a regular reader of the Rabbit Room, a blog run by a group of Christian artists mostly around the Nashville area. They're a pretty amazing group of people - artistically talented as painters, writers, and musicians, mature, deep and thoughtful in their faith, and (importantly in terms of keeping me coming back) funny as all get out.

Recently they had a weekend get together where they had a numbr of speakers (and some kick-hiney food). One of the speakers was Walter Wanegrin, who wrote a book called The Book of The Dun Cow, a very powerful story where the protagonists are all animals fighting against Wyrm, the source of all evil in their world. It's insightful, thought provoking, and funny.

One of the bloggers expressed how inadequate he felt felt discussing literature wit Wanegrin (note: this came from the blogger - by all indications, Wanegrin is an estremely humble and engaging fellow). Anyway, here's the quote:

I felt a thousand things as he spoke, which I feel incapable of putting into adequate words. I feel like a clever monkey trying to explain to Beethoven (who is deaf and dead) the joys of flinging poo.

Every once in a while, you hear a phrase that just sticks with you. I think this one qualifies, and I've been there.

How The Financial World Views Itself

A former student of mine who works at a hedge fund just sent me this. For what it's worth, he says it's pretty accurate

My favorite is how the traders view sales. Note: the image originally came from MacroMan.

Spam, Spam, Spam, Spam

A couple of years back, I was on the train (coming back from a consulting gig), and, being an extrovert, I started talking with a guy sitting next to me. He was a "stock tout". In other words, he was one of those guys who sent out emails pushing one stock or another. He claimed it was a pretty profitable business.

Now I have some evidence backing him up.
Here's a pretty interesting piece on the market effects of internet stock spam spam. A couple of years ago, Well, Frieder and Zittrain did a study titled Spam Works: Evidence from Stock Touts and Corresponding Market Activity. They found that on spammers "touting" (i.e. pushing) a stock has some pretty significant effects on the touted stock's price and trading volume. Here's the abstract (emphasis mine):

We assess the impact of spam that touts stocks upon the trading activity of those stocks and sketch how profitable such spamming might be for spammers and how harmful it is to those who heed advice in stock-touting e-mails. We find convincing evidence that stock prices are being manipulated through spam. We suggest that the effectiveness of spammed stock touting calls into question prevailing models of securities regulation that rely principally on the proper labeling of information and disclosure of conflicts of interest as means of protecting consumers, and we propose several regulatory and industry interventions.

Based on a large sample of touted stocks listed on the Pink Sheets quotation system and a large sample of spam emails touting stocks, we find that stocks experience a significantly positive return on days prior to heavy touting via spam. Volume of trading responds positively and significantly to heavy touting. For a stock that is touted at some point during our sample period, the probability of it being the most actively traded stock in our sample jumps from 4% on a day when there is no touting activity to 70% on a day when there is touting activity. Returns in the days following touting are significantly negative. The evidence accords with a hypothesis that spammers "buy low and spam high," purchasing penny stocks with comparatively low liquidity, then touting them - perhaps immediately after an independently occurring upward tick in price, or after having caused the uptick themselves by engaging in preparatory purchasing - in order to increase or maintain trading activity and price enough to unload their positions at a profit. We find that prolific spamming greatly affects the trading volume of a targeted stock, drumming up buyers to prevent the spammer's initial selling from depressing the stock's price. Subsequent selling by the spammer (or others) while this buying pressure subsides results in negative returns following touting. Before brokerage fees, the average investor who buys a stock on the day it is most heavily touted and sells it 2 days after the touting ends will lose close to 5.5%. For those touted stocks with above-average levels of touting, a spammer who buys on the day before unleashing touts and sells on the day his or her touting is the heaviest, on average, will earn 4.29% before transaction costs. The underlying data and interactive charts showing price and volume changes are also made available.

If you're not convinced (or even if you are), I have a couple of names of people who are related to the former finance minister of Nigeria who need your help getting money out of the country (and are willing to share the profits with you). I'll give them to you for a small finder's fee. Just send me the routing number on your bank account and I'll take care of it electronically.

HT: The Psi-Fi Blog

Of course, with a title like that, it was inevitable

Here We Go Again

All good things (and summers) come to an end - we're starting back up at Unknown University. For the first time in four years, I get to teach the undergraduate introductory course. For many faculty, this would be a bad thing (a lot of my colleagues simply don't like teaching the core course). However, I find it to be one of m favorite classes - it's easy, and I get to be an energetit and somewhat goofy evangelist for the Finance Department.

While putting together my syllabus, I went looking for an appropriate quote or two (I usually stick a few in there, if only for my own amusement). I came across a perfect one for the Unknown Daughter. As I've mentioned before, she's extremely bright (I know, I'm biased). But she also hangs out with a great bunch of kids - she and her closest three girlfriends are all smart, creative, and nice. They now can have a group motto.

The quote (attributed to Mark Twain) is:

Knowledge is Power
Power Corrupts
Study Hard
Be Evil

Even better, you can buy a t-shirt with the motto at Cafe Press.

Getting My Troubles Beind Me

Disclaimer: the following post may contain topics that are unappealing to those of a squeamish or overly proper attitude.

One of the problems with getting older is that things wear out. While I'm still relatively young, I've had a few irritating problems lately. One of them that's developed over the loast couple of years is a pretty nasty case of hemorrhoids (basically varicose veins in the butt). After all, I have a job where I sit down a lot. And while cycling doesn't cause them, it can aggravate existing ones.

So, last Friday, I went in for outpatient surgery. Of course, that meant that on Thursday I had to uses something like this to get all "cleaned out". For a far-too-detailed description of the "prep" process, check out Dave Barry's post here (while you're there, if you haven;t yet had a colonoscopy and you're due for one, get to it).

The actual surgery (early Friday afternoon) went fine - they gave some high quality drugs that completely knocked me out, and a shot that lasted until the late evening to numb things "down there". On the way home, we stopped at the drug store for some heavy-duty pain meds (Percocet), dropped me off at home, and then went out to pick up the kids.

Then the fun began. I spiked a fever (101.5) and by about 8:00, I was just about in the most pain of my entire life (and I've broken several bones, torn rotator cuffs, had multiple surgeries, etc...). Even on the max dose of Percocet, I thought I was going to (as my kids would say) "Start crying like a little girl".

Luckily, it didn't last long - by Saturday morning, I upgraded to as uncomfortable as hell, which was livable. And by today, I'm actually sitting up (albeit with an inflatable donut).

The only bright side is that I get to miss our all-day faculty retreat, since I can't sit for any amount of time. There's some irony there.

Hemorrhoid surgery 0r all-day faculty planning meeting? Let me think...

What Does The Class of 2014 Know?

When I was an undergrad (yeah, I know - a long time ago), I would often roll my eyes when a professor made a cultural reference that was about 30 years before my time. Now I increasingly find myself in the clueless professor's shoes. It's not surprising, since I've lived almost 3x as long as incoming freshmen.

Every year, Beloit College publishes a "mindset" list for the incoming freshman class. It lists some of the "cultural touchstones" are a part of the class's lives (who were mostly born in 1992). Here are some of the items on this year's list that stood out:

4. Al Gore has always been animated.
12. Clint Eastwood is better known as a sensitive director than as Dirty Harry.
27. Computers have never lacked a CD-ROM disk drive.
53. J.R. Ewing has always been dead and gone. Hasn't he?
64. Having hundreds of cable channels but nothing to watch has always been routine.

Read the whole thing here - interesting stuff, and it'll make some of you shake your heads at how the world has changed in such a short time.

I'm Still Alive (but things might make me laugh myself to death)

Because of the end of the semester, some heath issues (since resolved), working on research, and being a bit burned, I haven't posted anything for several months.

But like one of the best business tacticians of our times says, "Just when I thought I was out... they pull me back in". So I guess this is my "welcome back" post.

I just received a referee's report that made me laugh at its awesomeness. First a bit of background: I sent a paper to a lower-tier journal back in June of 2008. There was no response for over a year, so I sent several emails (and voice mails) to the editor with no response. Finally, getting fed up, back in November, I sent him an email (and follow-up voicemail) asking the editor to withdraw the paper. We subsequently got a revise and resubmit another journal.

Then today I get this from the original journal (i.e. the where I'd withdrawn the paper long ago):

RE: XXXXX and the use of XXX

I have now received a report on your paper in which the referee makes a number of recommendations for improvement. Unfortunately I am unable to accept the paper for publication in its current form. However I would be happy to reconsider the paper if you were to revise it along the lines suggested by the referee. I look forward to your resubmission.

The reviewer's comments are given below.

Referee: 1
Comments to the Author

This paper examines the relationship between XXX and XXX. However, Pearson correlation coefficient that this paper uses is very ordinary. And this often does not measure the non-linear relationship for variables. In addition, the paper does not make the necessary statistical test and analysis to the studying results.

Note: emphasis is mine, and I only changed the relatively few words necessary to protect the guilty.

Yes, that is the sum total of the referee's report. I'd always heard that the main difference between "good" journals and "weak" ones wasn't so much the mean quality of reviewer but the variance. Now I have my own data point.

Next time I will make sure to use "extraordinary" Pearson correlation coefficients and "make the necessary statistical test and analysis to the studying result".

update: I told a friend and former classmate of mine about this, and he suggested that "Outstandingly Bad Referee Reports" would make for a fun session topic at a conference- particularly if we had a journal editor select the panel members. However, he suggested that the entertainment value would be much better if you could somehow ensure that (unbeknownst to each other) both the recipients of the reports and the originators were both on the panel).

But that would be wrong. Funny, but wrong.