Facing the Big Guns Tadas Viskanta, who writes and curates the excellent Abnormal Returns, recently penned an equally excellent article entitled There Has Never Been A Better Time To Be An Individual Investor. In this he cogently sets out a list of reasons why investing is cheaper and easier than ever before while caveating that our innate biases work against us when investing. While agreeing with every word of the article, I think there’s danger for anyone executing anything other than the...

I’d like you to memorise a number for me. The number is 111011101001101010010. Easy, huh? Now, read on. Shouting at the Plastic We humans have many unusual traits. We’re the only mammal that can’t swim when it's born, the only mammal whose male can’t tell when its female is fertile, we have large brains which we habitually attack with fermented grains, we walk upright other than in ongoing fermented grain situations, and, perhaps most importantly, we use language to communicate (even when...

Quills and Nudges The British Civil Service is not a body known for radical change; it’s never quite got over having to give up the quill pen and tends to view with suspicion newfangled ideas like computers and women in the workplace. Despite this it’s currently at the heart of a large scale experiment on the use of techniques from behavioral science, aka, “nudge” theory. Sitting at the center of UK government is the Behavioural Insights Team (BIT), which is tasked with using behavioral...

Secrecy and Suspicion The increasing importance of hedge funds in the market has attracted attention, especially since they've become every politicians' favorite target when discussions move to market stability and manipulation. The secrecy associated with their activities arouses both mystique and suspicion. New research suggests that this secrecy is important to hedge fund outperformance and, counterintuitively, argues that the attempts to maintain that secrecy are partially responsible for...

Holy Theory We’ve met the nasty nature of confirmation bias on several occasions. This is the twisted trait that sees us in thrall to the views of others around us, and helps us encourage them to maintain those views, regardless of anything resembling reality. But this is only the half of it. No, we also have to cope with the impact of information that blows huge great holes in our world views and which undermines our most devoutly held beliefs. When faced with unequivocal evidence that...

The Zanzibar Effect Everywhere you look in the investment industry it appears that the odds are stacked against the smaller investor. In every trade we make there’s a counterparty against whom we’re taking a bet and all too often they’re better informed and equipped than we are. For the most part trading is simply a way of enhancing the profits of the securities industry. As any investor knows, the key to a successful business is establishing a competitive advantage, so it makes it all the...