Marcos Lopez de Prado, the financial mathematician whom we have mentioned several times before in this venue (see, for example, Marcos Lopez de Prado testifies before U.S. Congress), has co-written an article entitled Exit Strategies for COVID-19: An Application of the K-SEIR Model. The article, actually a 52-page presentation file, is co-authored by Lopez de Prado (Cornell University) and Alexander Lipton (Hebrew University of Jerusalem and MIT).
In this presentation, the authors argue that universal lockdowns are blunt tools that should be employed only for brief periods of time. They then present a new mathematical model (K-SIER), which permits one
Continue reading Exit strategies for Covid-19
An academic “ivory tower” (St. John’s College, Cambridge, UK)
In an interview published at the Enterprising Investor blog, Frank Fabozzi, a well-known researcher and author in the mathematical finance field, has sharply criticized the current state of academic economics and finance.
Here are some highlights:
The “rational models” constructed in economics and finance are increasingly disconnected from real-world behavior, as has been shown by research in behavioral finance. As Fabozzi and Sergio Focardi argued in 2012, “economics in its current form does not describe empirical reality but an idealized rational economic world.”
The problem with relying on “rational
Continue reading Frank Fabozzi blasts the state of academic economics and finance
A new video has been produced by the Mathematicians Against Fraudulent Financial and Investment Advice (MAFFIA) group. It explains, in simple terms, how many of the financial strategies and funds available today are based on a statistically dubious foundation, typically rooted in selection bias effects, because the finance world, unlike other fields such as the pharmaceutical industry, has not yet been forced to adopt the necessary rigorous statistical methodology to prevent such problems.
As a result, we often see a “vicious cycle”:
Academic researchers publish a paper describing a new investment strategy, but fail to disclose the fact that they
Continue reading New video explains the danger of selection bias in finance
In a 25 May 2018 Forbes article, Brett Steenbarger interviews David H. Bailey and Marcos Lopez de Prado on the growing crisis of pseudoscience in finance.
Here is an excerpt:
Imagine that a pharmaceutical company develops 1000 drugs and tests these on 1000 groups of volunteer patients. When a few dozen of the tests prove “significant” at the .05 level of chance, those medications are marketed as proven remedies. Believing the “scientific tests”, patients flock to the new wonder drugs, only to find that their conditions become worse as the medications don’t deliver the expected benefit. Some consumers become quite
Continue reading Bailey and Lopez de Prado on the crisis of pseudoscience in finance
David H. Bailey will join other speakers at the Artificial Intelligence and Data Science: Capital Markets conference, to be held 6-7 December 2017 at the National Museum of the American Indian (NMAI), One Bowling Green, New York City.
According to the conference website,
Complex mathematical modelling has always been part of the data-driven financial world, but today professional money managers are exploring a new range of techniques including machine learning, deep learning and neural networks. They have also become familiar with the relatively new discipline of data science – really an intersection of software engineering, statistical modelling, research analytics,
Continue reading Bailey to speak at AI-Capital Markets Conference in NYC
One of us (Marcos Lopez de Prado) has been interviewed on the topic of educational training in the finance field by Institutional Investor. A brief synopsis of this interview is below. The full article is HERE.
How Universities Are Failing Finance Students
With investment shops fighting over mathematicians and engineers, a Guggenheim executive argues that finance degrees and departments “face irrelevancy.”
Synopsis: In an “Invited Editorial Comment,” in Institutional Investor, Marcos López de Prado takes higher finance education and academic research to task for operating in a vacuum outside the pragmatic world of industry. Holder of a couple of PhDs
Continue reading How universities are failing finance students
We have learned that two of our MAFFIA group (Bailey and Lopez de Prado), together with Jonathan Borwein (posthumously) and Amir Salehipour, were awarded the “Silver Bullet” award (from the “Dash of Insight” group) for our article “Evaluation and ranking of market forecasters.”
See the entry for 5/20/2017 HERE.
(Only Bailey’s name was listed at the above URL, but all authors should be equally credited.)
Our preprint manuscript is available HERE.
One of us (Marcos Lopez de Prado) has published the article Mathematics and economics: A reality check in the Journal of Portfolio Management. A free version of the article is available here.
Lopez de Prado argues that while economics is arguably one the most mathematical of the social sciences, the mathematical methods of economists may not be up to the task of modeling the complexity of the social institutions and the business/finance world. Outdated and inappropriate statistical methods are of particular concern, with economists and econometricians often drawing very dubious conclusions from the available data.
The author suggests that graph
Continue reading Mathematics and economics: A reality check
The Mathematical Investor was recently named one of the Top 100 Math Blogs for students and teachers of mathematics, by Feedspot. The full list of the top 100 math blogs can be found HERE. We were awarded this “badge”:
On 12 July 2014, David H. Bailey and Jonathan M. Borwein (two of the bloggers on this site) presented the talk Scientific Integrity in Mathematical Finance at the Workshop on Optimization, Nonlinear Analysis, Randomness and Risk, held at the Centre for Computer-Assisted Research Mathematics and its Applications (CARMA), University of Newcastle, Australia. The viewgraphs for the talk are available here.
In this talk, Bailey and Borwein summarize research outlined in their paper (co-authored with Marcos Lopez de Prado and Qiji Jim Zhu), Pseudo-mathematics and financial charlatanism: The effects of backtest overfitting on out-of-sample performance. The talk also includes a series
Continue reading Bailey and Borwein give talks on integrity and reproducibility in mathematical finance
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