Fooled by Randomness. N.N.Taleb

Thursday, 10 April 2008 13:58

Fooled by Randomness. The Hidden Role of Chance in Life and in the Markets. N.N.Taleb

A thought-provoking reading. The author definitely enjoys and thrives on expressing a number of well articulated sharp opinions on a number of subjects.

Among other things, Taleb uses a trend-on-top-of-noise model to make the point that larger time scale improves what a natural scientist would call signal-to-noise ratio in the analysis of investment performance. The short time scale is mostly meaningless; the significance of performance record grows with time scale. To quote Taleb: "This explains why I prefer not to read the newspaper (outside the obituary), why I never chitchat about markets, and, when in a trading room, I frequent the matematicians and the secretaries, not the traders. It explains why it is better to read The Economist on Saturdays than the Wall Street Journal every morning (from the standpoint of frequency, aside from the massive gap in intellectual class between the two publications)."

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