Month: July 2014

The genetics of investment biases

That is a new paper by Henrik Cronqvist and Stephan Siegel, here is the abstract:

For a long list of investment “biases,” including lack of diversification, excessive trading, and the disposition effect, we find that genetic differences explain up to 45% of the remaining variation across individual investors, after controlling for observable individual characteristics. The evidence is consistent with a view that investment biases are manifestations of innate and evolutionary ancient features of human behavior. We find that work experience with finance reduces genetic predispositions to investment biases. Finally, we find that even genetically identical investors, who grew up in the same family environment, often differ substantially in their investment behaviors due to individual-specific experiences or events.

Hat tip goes to Kevin Lewis.  There is an ungated copy here.

Rereading *Catcher in the Rye*

1. Back then, if you didn’t use your prostitute and then tried to underpay her, she would call you a “crumb-bum.”

2. It really does have passages like: “”Most guys at Pencey just talked about having sexual intercourse with girls all the time — like Ackley, for instance — but old Stradlater really did it.  I was personally acquainted with at least two girls he gave the time to.  That’s the truth.”  And the “crumby,” squirting water passage on p.70 sounds really bad but in fact ties into what the novel is really about, which I say is impotence and also post-traumatic stress disorder.  Read p.156 with this in mind.

2. Here is the original Robert Burns poem connected to the book’s title, mostly about sex, unlike its use in the novel, which I take to mean saving young men from the grim reaper (p.191) in a manner reminiscent of a Winslow Homer painting.  So the book is saying America is not yet ready to fuck, not really, not in 1951, Fed-Treasury Accord or not.  And in the final section of the book “fuck you” is the phrase which Holden is determined to wipe out.

3. Salinger took part in the D-Day invasion with part of the manuscript in his backpack.  Salinger also fought in some of the toughest battles of WWII and later in his life sought extreme withdrawal.  Here is more about Salinger at war.  It all supports the notion of WWII as the major event in his life and one which he never got over.  It is no accident that the deceased younger brother is named Allie.

4. Back then, they still called it Atlantic Monthly.  pp.134-135 reflect the earlier fascination with dioramas in museums.

5. There is a corniness to how people thought and spoke back then which the book captures remarkably well.

6. Here is a recent re-read of the book which picks up on a lot of its funny slang.  Here is a recent polemic against the book.

7. The Amazon site for the book is here.  Here is the Wikipedia page, the book still sells about 250,000 copies a year.  Steven Spielberg once bid for the movie rights.

I expected not to like the re-read, but overall I thought it was pretty damn good and almost universally misunderstood.

Next up: John Knowles’s A Separate Peace. and maybe also Louise Fitzhugh’s Harriet the Spy.

A comparison of programming languages in economics

There is a new NBER working paper with that title, by S. Borağan Aruoba and Jesus Fernandez-Villaverde. Here is the abstract:

We solve the stochastic neoclassical growth model, the workhorse of modern macroeconomics, using C++11, Fortran 2008, Java, Julia, Python, Matlab, Mathematica, and R. We implement the same algorithm, value function iteration with grid search, in each of the languages. We report the execution times of the codes in a Mac and in a Windows computer and comment on the strength and weakness of each language.

Here are their results:

1. C++ and Fortran are still considerably faster than any other alternative, although one needs to be careful with the choice of compiler.

2. C++ compilers have advanced enough that, contrary to the situation in the 1990s and some folk wisdom, C++ code runs slightly faster (5-7 percent) than Fortran code.

3. Julia, with its just-in-time compiler, delivers outstanding per formance. Execution speed is only between 2.64 and 2.70 times the execution speed of the best C++ compiler.

4. Baseline Python was slow. Using the Pypy implementation, it runs around 44 times slower than in C++. Using the default CPython interpreter, the code runs between 155 and 269 times slower than in C++.

5. However, a relatively small rewriting of the code and the use of Numba (a just-in-time compiler for Python that uses decorators) dramatically improves Python ’s performance: the decorated code runs only between 1.57 and 1.62 times slower than the best C++ executable.

6.Matlab is between 9 to 11 times slower than the best C++ executable. When combined with Mex files, though, the difference is only 1.24 to 1.64 times.

7. R runs between 500 to 700 times slower than C++ . If the code is compiled, the code is between 240 to 340 times slower.

8. Mathematica can deliver excellent speed, about four times slower than C++, but only after a considerable rewriting of the code to take advantage of the peculiarities of the language. The baseline version our algorithm in Mathematica is much slower, even after taking advantage of Mathematica compilation.

There are ungated copies and some discussion here.

Black markets in everything, electronic medical records edition

As health data become increasingly digital and the use of electronic health records booms, thieves see patient records in a vulnerable health care system as attractive bait, according to experts interviewed by POLITICO. On the black market, a full identity profile contained in a single record can bring as much as $500.

There is more here, none of it reassuring.

Disruption Big Time

In an excellent post on the Lepore-Christensen fracas, John Hagel draws on Deloitte’s Shift Index to provide some data on disruption. Disruption has increased by a variety of metrics.

One of the metrics in our Shift Index looks at what economists call topple rate – the rate at which leaders fall out of their leadership position. In this case, we focused on the rate at which public US companies in the top quartile of return on assets performance fall out of this leadership position.Between 1965 and 2012, the topple rate increased by 40%.

OK, but the skeptic might reply that this is only about financial performance. Another more significant measure of fall from leadership position is provided by my old colleague and mentor, Dick Foster, who looked at the average lifespan of companies on the S&P 500.  In 1937, at the height of the Great Depression and certainly a time of great turmoil, a company on the S&P 500 had an average lifespan of 75 years.  By 2011, that lifespan had dropped to 18 years – a decline in lifespan of almost 75%.  At the same time that humans are significantly increasing their lifespan, large companies have been heading rapidly in the opposite direction.

Another measure of disruption is executive turnover which has increased.


Some of Deloitte’s work also speaks to the implicit idea in Piketty that capital accumulation is easy. Once someone has capital, Piketty argues, that capital just grows and grows at r>g. Not so, and less so today than ever before. According to Deloitte the return on capital is decreasing and the volatility is increasing. Here’s the return on assets by top and bottom quartile. Even in the top quartile, r is decreasing but it’s easier than ever before to pick wrong and lose your shirt in the bottom quartile.


Lots more of interest in Hagel’s post and in Deloitte’s work.

Stories that sneak up on us (China story of the day)

Here is one of them, coming to me in an email from the Sinocism China Newsletter, about the growing demands for democracy in Hong Kong:

Any public suggestion that the People’s Liberation Army might intervene here was politically unacceptable until very recently, but it is now raised as a possibility by some of Beijing’s advisers. “A showdown is getting more and more inevitable by the day, and some degree of violence is imminent,” said Lau Nai-keung, one of Beijing’s most prominent allies in Hong Kong. “If worst comes to worst, the P.L.A. will come out of its barracks.” Mr. Lau is one of the six Hong Kong members of the Basic Law Committee, a group under the National People’s Congress Standing Committee in Beijing that sets policies relating to Hong Kong’s mini-constitution, the Basic Law.

An associated NYT story is here.  Uighur terrorism has been another story that has snuck up on us.  How many more China stories will be sneaking up on us this year?  Next?

China fashion markets in everything

Fashionistas no longer have to choose between looking stylish and protecting their lungs.

Next week, Beijing- and Hong Kong-based designer Nina Griffee, owner of face-painting and body art company Face Slap, will introduce a new line of outfits that incorporate face masks on the runway as part of a collection at Hong Kong Fashion Week.

Even the designer, who was born in England, admits that the eight outfits she’s created to launch the line – which look something like burkas for the space age – might not be everyone’s cup of tea. “There’s a fine line between fashion and costume,” she says. “I’m not entirely sure we made it completely into the fashion category.”

Though it isn’t the first time models will have appeared on stage wearing masks, it appears to be the first time the effect is so deliberate.

The outfits incorporate Vogmask pollution masks—already a choice among many of the pollution cognoscenti as the most stylish face coverings—attached by a zipper to shawls, dresses and ponchos. The zipper allows the wearer to remove the mask to dine, for instance, while retaining the high-fashion look.

There is more here, with good stylish photos too.

What I’ve been reading

1. Tom Doyle, Man on the Run: Paul McCartney in the 1970s.  This book actually has some fresh material, plus you realize that John and Paul were even more obsessed with each other than we used to think.

2. Francisco Goldman, The Interior Circuit: A Mexico City Chronicle.  Further evidence that politics is often the enemy of really good books, nonetheless this is still a moderately interesting treatment.

3. Elizabeth Pisani, Indonesia, Inc.: Exploring the Improbable Nation.  Lots of emphasis on the islands.  Pretty good, not great.

4. Hans Ulrich Obrist, ?Everything You Always Wanted to Know About Curating*?, a successful Swiss attempt at being clever and punchy.

5. Carl Wilson, editor, Let’s Talk About Love: Why Other People Have Such Bad Taste.  Most of this volume concerns Céline Dion, or is that Celine Dion?  Fascinating in parts, the subtitle should have been the title.

As part of an agreement with Bryan Caplan, I’ve also started an attempted reread of Catcher in the Rye, and hope to report back to you on that one…

Assorted links

1. Bryan Caplan on private sector vs. public sector workers: “Last month, I read most of the academic literature on this topic.  The more I read, the more confused I became.  As far as I could tell, researchers reached a clear answer: federal employees really are paid more than equivalent workers in the private sector.”

2. Slate on Srugim.

3. Megan on Hobby Lobby, on the mark.  The current discussion of this issue is chockful of mood affiliation.

4. Why don’t we have more telecommuting?  And Airbnb and the evolution of trust.

5. The earlier baby boom for Southwest native Americans.

Will international trade as a share of global gdp go up or down?

The common presumption is that it will go up, but I find this question not so easy to answer.  Let’s say this is over the next twenty years, will the technologies of easier cross-border trade really outrace the other progressing technologies in play?  Here are a few forces suggesting the share of trade in gdp will go up:

1. More countries are attaining middle income status and higher levels of productivity.  In a “balls and bins” approach to trade, there will be fewer zeros.

2. The internet makes it easier to trade across borders and also more people are learning the global language of English.

3. Social and commercial networks are increasingly global rather than local or national.  I think this is the most important positive force.

4. Natural resources are becoming a higher share of gdp, and trade in those resources is especially imperative, given the materials-intensive nature of most emerging economies.

Here are a few forces suggesting the share of trade will go down:

5. Services will be a higher proportion of gdp and services are harder to trade, for both economic reasons and for legal, protectionist reasons.

6. China’s economy will become less resource-intensive.  More generally the amazing global rise of China will not continue at its previous pace.

7. There already has been a lot of wage equalization across borders, and that limits future gains from additional cross-border trade.  Even though average Chinese wages remain low, actually setting up an export-feasible enterprise in China today cannot be done without paying a pretty severe wage bill.

8. Robots and smart software lower the returns to investing in and trading with lower-wage nations.  Put the plant in Texas.

9. The next twenty years may not be as peaceful as the last twenty years.

When you add this all up, globalization as a trend may well have peaked over the last twenty years.