Reading links
‘Economist’ thinks that there is no broken society in Britain. What say you?
Link from Paul Kedrosky on Niall Ferguson’s infidelity. Fascinating in its own way. Maintaining a certain consistency between what one says, one believes and does is, well, hard.
Again, thanks to Paul Kedrosky, this article in defence of Greenspan or a platform for Greenspan to defend himself. Not very persuasive.
The letter from a former student to Professor Emanuel Derman makes for interesting and thoughtful reading.
When I shared it with a colleague, he sent this thoughtful reply:
Quantitative Finance (QF) people will blame that it is the economics that doesn’t make sense (representative agent paradigm, CAPM, CCAPM, no-arbitrage = existence of martingale measure etc, SDF framework for asset pricing). The whole research community is too fixated with having a parsimonous model so they can do some comparative statics to get some predictions etc. But often when brought to the data, many of them don’t perform well (equity premium puzzle). Even extensions to heterogenous agents and bounded rationality don’t seem yield any ground breaking results.
Finance is one field where the reality is further away from the theory than other disciplines…
Professor Daniel Rodrik loses himself and us in the last four paragraphs. In Singapore style, I can only ask, ‘So, how?’
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