Effective Financial Theories

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1. Introduction One of the most astonishing things about financial markets is that there is interesting economics operating at so many different scales. Yet, no one would ever guess this fact by looking at standard asset pricing theory. To … [Continue reading]

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]