There have been a number of post on finance and trading on LW recently. gilch and I realized that we don't have a great sense of how much people on LW know already and what they would find helpful.
Technical analysis, momentum, trend following, and the like, from an EMH-informed perspective.
I've been dismissive of anything that looks at past price information, but given that markets are clearly sometimes inefficient due to short selling being constrained by availability and cost of borrowing stock (which causes prices to be too high which can cause short squeezes), this can "infect" the market with inefficiency during other times as well (because potential short sellers are afraid of being short squeezed), which means there's no (obvious) theoretical reason to dismiss technical analysis and the like anymore.
Honestly the very basics. How does short selling actually work? How does leverage actually work? As someone who has never really gone into finance I'd love a LW sequence explaining what all the numbers actually mean.
A curriculum for getting started, as well as some guidelines for when it's worthwhile to begin doing so. Personally, the flow into my savings in on the order of $4k/month, plus a pool currently of $20k cash, and about $90k invested in mostly stock ETFs. I have appetite for risk and tolerance of volatility, but don't yet know if the sums of money I have to play with make sense for strategies beyond 'hold the market'. If so, I don't know how to begin bootstrapping -- gilch's recent posts have been interesting, but are a still a bit light on details and model-building.
I’ve been wondering what are the caveats with relying on Sharpe ratio to measure how much risk was taken to get an investment’s returns.
For example, Titan touts a high Sharpe ratio, and frames its marketing like it’s better than the S&P in every way with no downside: see https://www.lesswrong.com/posts/59oPYfFJjYn3BBBwi/titan-the-wealthfront-of-active-stock-picking-what-s-the
But doesn’t EMH imply that all Sharpe ratios long term will tend to the same average value, i.e. no one can have a sufficiently replicable strategy that gives more returns without more risk?
And in the case of Titan, is the “catch” to their Sharpe ratio that they have higher downside exposure to momentum reversal and multiple contraction?
It might be out of the scope of what you're asking but personnaly I'm very interested in the philosophical constraints of the models used in economics.
Specifically, I found that I can learn on pretty much any theoretical model of finance quite easily if I spend enough time on the internet.
But, in the process of reading about it, it's actually very hard to know if it takes for granted a specific philosophical model with specific restraints.
I lack a global understanding of the philosophy of economics and it worries me given the supposed hegemony of the US-born humans in financial science as well as the usual cultural disdain towards "left" ideas, socialist and communist offshoots etc. Be it conscious or not.
I'd be interested in reading a review / summary of PIMCO's An Asset Allocation Primer: Connecting Markowitz, Kelly and Risk Parity (or a post that otherwise covers the same material).
I have a rough idea about what M1 and M2 and how banks create M2 money but at the same time I uncertain that I understand the subject well. Especially, when it comes about reasoning about what that means for society. The fact that there are a lot of conspiracy theories around the topic makes it harder to trust sources on the internet to give a good explanation of the topic.
Why are people willing to hold so much government debts at zero percent interest rates? Why don't the institutions that hold so much debt instead buy index funds?
A post on the absolute basics of how stocks work, written for an intelligent, open-minded, yet totally uninformed audience.
It could cover info on how and why stock gets created in the first place, regulatory agencies and what they do, what benefits and risks are attached to stock ownership, the different ways it can earn money for its owners, and then get into the more theoretical stuff and weird behavior that tends to get talked about more.
The reason I'd like to read this is that I've picked up all my (limited) financial knowledge from conversations, news articles, and podcasts. I've never tried to understand finance from the ground up, so my knowledge feels very patchy.
If that offer is still active, I, as an abstract thinker, formalism lover, and mathematical symbols worshipper, would very much enjoy a palatable door of entry into the world of finance. I've read so much, but grew so little, feeling like reading reflections of shadows in muddle puddles in a cave (Allegory of the cave).
1) Meta-level post listing interesting sources to learn different aspects: assets pricing, relevant parts of macro (for example, it seems that in academia, there's a number of different, conflicting, business cycle theories - but as financial institutions actually have skin in the game, it'd seem reasonable that they came up with a "correct" version of it), HFT, general info.
2) Examples of (obviously, already-dead) strategies that made significant profit before - if such descriptions are available anywhere.
2) Books reviews - having recently read Flash Boys and When Genius Failed, I'd be really interested in an expert evaluation of those. Also, other books recommendations (as in 1), but with a more documentary(or even fiction?)-focus.
I think there are a lot of good sources out there on finance, and a LW author wouldn’t necessarily have any particular credibility or special knowledge on the subject.