Monday, September 24, 2012

Questions about TIPS

Marginal Revolution asks some interesting questions about TIPs and inflation.

Facebook's beta

This link popped up in my RSS reader today - from two different sources - finance II at tepper and newmark's door.

The basic finding:
The return correlation between Facebook and Zinga is greater that the correlation between Facebook and the S&P 500 and the trading volume correlation between FB and the S&P 500 is greater than the volume correlation between FB and Zinga.

I thought I'd run the numbers - here's what  I got:
covar(i,m)0.00001535 0.00007962 (0.00002087)
correl(i,m) 0.04 1.00 (0.04)
var(i) 0.001625 0.000080 0.003155
ann SD (i)
beta (i) 0.19281.0000 (0.2622)
Correl of volume 0.2592 1.00000.3256
R-sqr from CPM

Obviously these are two stocks that have very low market risk - less that 1% of their returns is explained by the S&P 500.   ZNGA has a negative beta, and the confidence interval for both betas is huge.

In other words, these are two stocks whose risk is virtually all idiosyncratic.  It is probably a mistake to put any weight on these beta estimates.


Friday, September 7, 2012

Bursting the bubble of investment management riches

An interesting article on the relevance of active management.  

Interesting because it is largely correct in that active management has been shown time and time again to be a loosing endeavor compared to indexing, and interesting because it heavily quotes Ron Elmer, a good friend on mine.