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# Author: John Mount

## “Easy” Portfolio Allocation

This is an elementary mathematical finance article. This means if you know some math (linear algebra, differential calculus) you can find a quick solution to a simple finance question. The topic was inspired by a recent article in The American Mathematical Monthly (Volume 117, Number 1 January 2010, pp. 3-26): “Find Good Bets in the Lottery, and Why You Shouldn’t Take Them” by Aaron Abrams and Skip Garibaldi which said optimal asset allocation is now an undergraduate exercise. That may well be, but there are a lot of people with very deep mathematical backgrounds that have yet to have seen this. We will fill in the details here. The style is terse, but the content should be about what you would expect from one day of lecture in a mathematical finance course.

## Relative returns: a banker versus trader paradox

Quick Joke.

Q: What is the difference between a banker and a trader?

A: A banker will try and tell you a 10% loss followed by a 10% gain is breaking even.

Continue reading Relative returns: a banker versus trader paradox

## CRU graph yet again (with R)

IowaHawk has a excellent article attempting to reproduce the infamous CRU climate graph using OpenOffice: Fables of the Reconstruction. We thought we would show how to produced similarly bad results using R.

Continue reading CRU graph yet again (with R)

## R examine objects tutorial

This article is quick concrete example of how to use the techniques from Survive R to lower the steepness of The R Project for Statistical Computing‘s learning curve (so an apology to all readers who are not interested in R). What follows is for people who already use R and want to achieve more control of the software. Continue reading R examine objects tutorial

## The Local to Global Principle

We describe the “the local to global principle.” It is a principle used to break algorithmic problem solving into two distinct phases (local criticism followed by global solution) and is an aid both in the design and in the application of algorithms. Instead of giving a formal definition of the principle we quickly define it and discuss a few examples and methods. We have produced both a stand-alone PDF (more legible) and a HTML/blog form (more skimable).

Continue reading The Local to Global Principle

## Google AdSense Channels IDs and the Cramer Rao Inequality

“Comparing Apples and Oranges: Two Examples of the Limits of Statistical Inference, With an Application to Google Advertising Markets” is our analysis of Google AdSense Channel IDs and our use of the Cramer Rao bound to show that these IDs fundamentally limit what participants in the Google online advertising market can measure (and therefore in turn limit what these players can do).

Continue reading Google AdSense Channels IDs and the Cramer Rao Inequality

## What is the gambler’s equivalent of Amdahl’s Law?

While executing some statistical detective work for a client we had a major “aha!” moment and realized something like “Amdahl’s Law” rephrased in terms of probability would solve everything. We finished our work using direct methods and moved on. But it is an interesting question: what is the probabilist’s (or gambler’s) equivalent of Amdahl’s Law? Continue reading What is the gambler’s equivalent of Amdahl’s Law?

## Survive R

New PDF slides version (presented at the Bay Area R Users Meetup October 13, 2009).

We at Win-Vector LLC appear to like R a bit more than some of our, perhaps wiser, colleagues ( see: Choose your weapon: Matlab, R or something else? and R and data ). While we do like R (see: Exciting Technique #1: The “R” language ) we also understand the need to defend oneself against the abuse regularly dished out by R. Here we will quickly share a few fighting techniques.

Continue reading Survive R

## A Discrete Model Gauging Market Efficiency

New paper: A Discrete Model Gauging Market Efficiency PDF

We *highly* recommend reading the PDF version, but please find below a HTML translation of the paper.

We follow up on some interesting work from the literature and explore some conditions that allow large predatory traders to dominate markets.