Friday, September 29, 2006
Thursday, September 28, 2006
When You're 21, You're No Fun
Went to see Ladytron tonight. Johnny was nice enough to get me tickets for my birthday. They were the sex.
Sunday, September 24, 2006
Brainstormin
So I find myself at the start of my third year in grad school with nearly all my required coursework completed about to embark upon my first piece of significant academic research. After two years of punishing qualifying exams and field requirements I stand ready to contribute to the total sum of human knowledge. What that contribution is exactly remains to be seen, but here's what I've got so far.
A couple of professors got me thinking about the relationship between volume and volatility in financial time series. Now one of the most well documented features of financial data is the fact that asset returns exhibit volatility clustering. This means that large changes in asset prices tend to be followed by large changes (and likewise for small changes), resulting in periods of high volatility and low volatility.
In order to capture this phenomena, a statistical model called ARCH was developed in the early 80's by Robert Engle, currently a professor at the Stern School of Business (NYU). ARCH (and its variants) parameterizes the conditional variance of a stationary time series (typically an asset return) as an autoregressive process, thereby allowing for serial dependence in volatility. Now this points to a deeper, more economic question. Why does ARCH exist? More specifically, what are the economic mechanisms which cause the magnitude of price changes to be serially correlated?
Perhaps a plausible explaination for the presence of ARCH is the idea that volatility clustering is merely a manifestation of the rate of information arrival in financial markets. The existing research indicates that information itself may be a serially correlated process, so that market participants receive information in temporal 'lumps' as opposed to an independent random stream. The reaction of market participants to these information lumps cause asset prices to fluctuate thereby resulting in volatility clustering. Therefore, to understand the information arrivals process is to understand ARCH. The problem faced by the economist and econometrician is the fact that the rate of information arrival is largely an unobservable (latent) process which introduces difficulties in econometric modelling (how does one devise a statistical model for something that one cannot observe?).
That said, the idea of information flow also points to the behavior of trade volume. Unlike volatility, the issue of trade volume has not been well explored but it is clear that the two are inextricably linked. One need only think about the basic ideas of supply and demand to see this.
So my first step is to get my hands dirty and have a look at some volume data. Wish me luck!
A couple of professors got me thinking about the relationship between volume and volatility in financial time series. Now one of the most well documented features of financial data is the fact that asset returns exhibit volatility clustering. This means that large changes in asset prices tend to be followed by large changes (and likewise for small changes), resulting in periods of high volatility and low volatility.
In order to capture this phenomena, a statistical model called ARCH was developed in the early 80's by Robert Engle, currently a professor at the Stern School of Business (NYU). ARCH (and its variants) parameterizes the conditional variance of a stationary time series (typically an asset return) as an autoregressive process, thereby allowing for serial dependence in volatility. Now this points to a deeper, more economic question. Why does ARCH exist? More specifically, what are the economic mechanisms which cause the magnitude of price changes to be serially correlated?Perhaps a plausible explaination for the presence of ARCH is the idea that volatility clustering is merely a manifestation of the rate of information arrival in financial markets. The existing research indicates that information itself may be a serially correlated process, so that market participants receive information in temporal 'lumps' as opposed to an independent random stream. The reaction of market participants to these information lumps cause asset prices to fluctuate thereby resulting in volatility clustering. Therefore, to understand the information arrivals process is to understand ARCH. The problem faced by the economist and econometrician is the fact that the rate of information arrival is largely an unobservable (latent) process which introduces difficulties in econometric modelling (how does one devise a statistical model for something that one cannot observe?).
That said, the idea of information flow also points to the behavior of trade volume. Unlike volatility, the issue of trade volume has not been well explored but it is clear that the two are inextricably linked. One need only think about the basic ideas of supply and demand to see this.
So my first step is to get my hands dirty and have a look at some volume data. Wish me luck!
Wednesday, September 20, 2006
Tuesday, September 12, 2006
Wednesday, September 06, 2006
Jon's European Adventure - Part IV: Weekend At Bernie's
So Ive spent the past six days or so with two old friends from Melbourne Uni (thats college to you crazy Americans) burning through the French motorways at breakneck speeds in a Mini Cooper S. As crazy as it may sound, I must admit that a lot could be said for sharing a small british race car with two cantankerous bastards intent on smoking, drinking and cussing their way through the French countryside. We made our way from Bordeaux - which was deemed a 'stankin boghole' - to the Midieval town of Sarlat and then through to Burgundy where we stayed for three nights at a lovely bread and breakfast. Our first night in Marsannay (a small village on the outskirts of Dijon) was spent dining on amazingly rich foies gras and duck breast at Les Gourmets, a one michelin star restaurant. Inspired by good french cooking we spent the next evening at the three michelin star rated Benard Loiseau where we dropped a small fortune on Tattinger champagne and a most delectable 8 course degustation.
After spending a day recovering from good food poisoning, we got back in the Mini and drove through the French Alps back into Italy, stopping periodically in order to allow me to wander into the mountainside and spin around, arms outstretched ala Julie Andrews in the Sound of Music. We spent the evening at another wonderful bread and breakfast run by a charming but disturbingly muscular french woman by the name of Claude who served us a very delicious four course meal which we ate surrounded by her husband's antique coffee grinder and cowbell collection.
Right now Im in a seaside town called Lerici, just around the corner from Cinque Tierre and La Spezia. Ill be spending the rest of my holiday here before heading back to New York on September 11th. Stay Tuned!
After spending a day recovering from good food poisoning, we got back in the Mini and drove through the French Alps back into Italy, stopping periodically in order to allow me to wander into the mountainside and spin around, arms outstretched ala Julie Andrews in the Sound of Music. We spent the evening at another wonderful bread and breakfast run by a charming but disturbingly muscular french woman by the name of Claude who served us a very delicious four course meal which we ate surrounded by her husband's antique coffee grinder and cowbell collection.
Right now Im in a seaside town called Lerici, just around the corner from Cinque Tierre and La Spezia. Ill be spending the rest of my holiday here before heading back to New York on September 11th. Stay Tuned!
Saturday, September 02, 2006
Jon's European Adventure - Part 3 : Bonjourrr, Ya Cheese Eating Surrender Monkeys
Am currently in an internet cafe in Sarlat, so this will be a quick one.
Arrived in Paris a couple of nights ago and proceeded to spend the next 20 hours shopping and carousing in the Marais. Picked up a fantastic pair of shoes from Trippen but resisted the temptation to drop nearly 500 euros on a delectable Dior sweater at Collette, a painfully chic boutique thrumming with smooth beats, beautiful shop boys and wonderful clothes that one selects not from vulgar racks but several mannequins scattered around the floor. I really miss having a disposable income. Le sigh indeed.
Ill be spending the next few days crammed in the back of a Mini Cooper zooming through the French countryside with my friends Mike and Mark. Stay Posted!!
Arrived in Paris a couple of nights ago and proceeded to spend the next 20 hours shopping and carousing in the Marais. Picked up a fantastic pair of shoes from Trippen but resisted the temptation to drop nearly 500 euros on a delectable Dior sweater at Collette, a painfully chic boutique thrumming with smooth beats, beautiful shop boys and wonderful clothes that one selects not from vulgar racks but several mannequins scattered around the floor. I really miss having a disposable income. Le sigh indeed.
Ill be spending the next few days crammed in the back of a Mini Cooper zooming through the French countryside with my friends Mike and Mark. Stay Posted!!
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