Jamie, Psych Risk Management & Living to Trade Another Day

This is a true story.

3 years ago today (I have this weird memory for dates), I spotted Jamie Dimon and Bill Daley sitting outside Gibsons in Chicago. I just happened to have come from a lunch with Patricia Crisafulli who had written the House of Dimon and I had her book with his picture […]

Report from The Society of Neuroeconomics

Last weekend, a group of the world’s preeminent neuroeconomists met in Evanston and the research findings reported on were strikingly different from even two years ago. Virtually nothing about system 1 (logic) and system 2 (emotion) and a new found appreciation for the integrated role of feelings and emotions in every risk decision. Antonio […]

Everyone is Talking about Behavioral Economics

No matter where I go, no matter who calls, no matter when I check twitter… there it is – “behavioral finance”. In an effort to understand the great financial crisis of 2008 everyone it seems has turned to what the academics call the “biases and heuristics lit”. I mean it seems so ubiquitous to […]

By |January 23rd, 2010|ReThinking|0 Comments

Pre-eminent Physical Experience

It is all too easy to forget that trading (not to mention life) is a physical experience. (See Descartes’ Error “I feel, therefore I Am” by Damasio) The path of least resistance is believing that risk decisions are mainly, if not exclusively, cognitive (thinking) events.

My just-ended golf weekend in Amelia Island reminded me how […]

Did Quant Models Fail? No, Not Exactly

Today I am being interviewed in conjunction with a project @ Columbia’s Graduate School of Business and a journalism fellowship project. Nouriel Roubini and Emmanuel Derman have been/are also on the docket for the subject of “What Went Wrong & What Can Be Done.”

The major points I want to make – and they apply […]

By |April 28th, 2009|Markets|0 Comments

Neuroeconomics – What You Need to Know

Right after “what the heck is psych cap” should come “what the hell is neuroeconomics”? Neuro on one hand and econ on the other? … Could they be more different – microscopic brain cells versus broad based financial interworkings?

Having just received (Thanks Sandy!) my copy of NEUROECONOMICS, Decision Making and the Brain, edited by […]

Keynes said it before us

Someone named Robert Skidlesky wrote a book called John Maynard Keynes: 1883-1946: Economist, Philosopher, Statesman. He says that Keynes said “not all future events could be reduced to measurable risk. There was a residue of genuine uncertainty and this made disaster an ever-present possibility, not a once-in-a-lifetime ‘shock’. Investment was more an act of […]

By |December 29th, 2008|Markets|4 Comments

Risky, Uncertain or Ambiguous?

If you ask a neuroeconomist about the markets, they will say markets are NOT risky. In fact, they are 100% certain that risk is not the issue in markets.

What you say? Isn’t that the whole point – judging risk? Well yes… but, well actually no.

Let me explain. To a neuroecon type risk = known […]

Elise Payzan Le Nestour on “The Brain on Risk”

On The Ubiquitous Missing Information in Markets: What Neuroeconomics Has to Say
‘Ambiguity’ is the Hallmark of Trading and Investing
The situation of taking a position when the odds are uncertain because of missing information is referred to by economists as “ambiguous”. F Knight in his book Risk, Uncertainty, and Profit was the first to emphasize […]

Shiller, Negative Affect & Psych Cap

Robert Shiller writes in the New York Times about the role of group-think during the upward phase of our blown-up housing bubble. He recounts the polite discounting of his warnings in Irrational Exuberance (see all of Shiller’s books) and says “speculative bubbles are caused by contagious excitement.”

He segues to the remaining gap between economics […]

By |November 2nd, 2008|Learning Psych Cap|0 Comments