Summary: Trading on Coincidences

1. Motivating Example This post gives a non-technical summary of the results in my job market paper, Trading on Coincidences (2012). I start with a simple example. Suppose you see Apple among the $10$ stocks with the highest returns over the past … [Continue reading]

The Law of Small Numbers

1. Introduction The "law of small numbers" is the name given to the well documented empirical regularity that people tend to overinfer from small samples in Tversky and Kahneman (1971). This post discusses a few of the results from Rabin (2002) … [Continue reading]

Arora et al. (2012)

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1. Introduction In this post I work through the main result in Arora, Barak, Brunnermeier and Ge (2012) which formulates a simple securitization setting with $I$ underlying assets (e.g., mortgages) and $J$ derivative assets (e.g., CDOs) … [Continue reading]

Notes: Gabaix (2012)

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1. Introduction In this post, I review the sparsity based model of bounded rationality introduced in Gabaix (2011) and then extended in Gabaix (2012). In the baseline framework presented in Gabaix (2011), a boundedly rational agent faces the … [Continue reading]