Tax on Playing Cards

Mark Thoma has points out an interesting piece of historical trivia: to discourage gambling, Great Britain used to have a special tax on playing cards.

Finishing the Semester

Posting will probably continue to be light while we finish up the semester.

The Bear Bailout

I’ve been wondering how much money the Bear Stearns bailout will really cost the Fed. Commenters are throwing around the 30 million dollar figure, but of course that represents an absolute worst case. Under the terms of the agreement with JP Morgan, the investment bank is on the hook for the first billion dollars in losses from liquidating the firm, while the Fed is responsible for the rest.

This Bloomberg article offers some useful information on the subject. They quote Joe Mason, a Drexel University professor who researches banking crises, who observes that on average creditors only recover 40 percent when liquidating insolvent banks. So the losses to the Fed could plausibly be potentially quite large.

Generalized Hyperbolic Distributions

I came across short paper by Stefan Jaschke that describes different modeling choices for stock returns (which famously have fat tails). The paper suggests generalized hyperbolic distributions as a possibility.

New Economic Geography

The New Economic Geography is a family of theoretical models that try to explain why modern economies naturally produce large cities or metropolitan regions. I came across this survey paper by Ottaviano and Thisse which introduces the subject.

Bear Stearns in Trouble

When the New York Fed organized a bailout by Wall Street of Long Term Capital Management, Bear Stearns notoriously refused to cooperate. Now it’s their turn, as the Fed and J.P. Morgan cooperate to prevent a complete collapse of the broker.

Lectures on the Volatility Smile

Edward Derman of My Life as a Quant fame is teaching a class on quantitative derivative pricing. He is placing his lecture notes on-line. The central topic seems to be the volatility smile.

Currency Trading Benchmarks

A new paper by Levich and Pojarliev shows that most of the apparent superior returns by active currency traders can be replicated by mechanical strategies. This resembles research in active mutual funds, which shows that most superior performance versus the market disappears once you control for mechanical strategies such as momentum.

Hoax Analyst Conference Calls

Here’s a strange story from the Wall Street Journal. Someone has been passing themselves off as an analyst at the quarterly conference calls. He calls in pretending to a well-known analyst, but when he’s given a chance to ask a question, he announces himself as Joe Herrick of Gutterman Research.  (There is no evidence that either Herrick or Gutterman Research really exist.)  Whenever called upon, they ask detailed questions full of corporate buzzwords such as Six Sigma. It’s not really clear if the questions make any sense, or what purpose they serve.  The whole thing is quite bizarre.

Death of a Data Website

I’m in the middle of collecting data for a project that I’m working on. I came across Economic Indicators .GOV, a US government website that gathers together the leading economic indicators for the state of the economy. The sad news is that the site is being discontinued on March 1, 2008 because of budget cuts.