A number of posts about:

Math

Illustrating the importance of data visualization

June 12, 2009

Andrew Gelman discusses research on attitudes toward gay marriage, by state, and notes this graph in particular, which shows the change in opinion over the last 15 years: Critically, he points out that the states which experienced the greatest change in attitude were the ones that already were most receptive. A naive analysis of the [...]

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Deconstructing the Gaussian copula, part I

June 5, 2009

A number of misconceptions about the Gaussian copula are addressed.

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Lies, damn lies...

June 2, 2009

A fascinating look at the politics of government statistics from Carl Bialik's WSJ blog.

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Nessie?

May 30, 2009

Via TangYauHoong.

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LARS and the lasso

May 28, 2009

I just came across a paper on LARS, the linear model selection algorithm that's sweeping the nation. The mathematically and/or masochistically inclined may view it here.* Ok, so it's not quite that popular, but it is being heralded as one of the biggest advances in linear modelling in a few decades - and that's saying a [...]

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Don't know much about calculus

May 28, 2009

Another excellent guest column by Steven Strogatz for the NYT Wild Side blog. The post delves into the mathematical beauty of the natural world, using love as a knowingly over-simplified metaphor. Although these examples are whimsical, the equations that arise in them are of the far-reaching kind known as differential equations. They represent the most [...]

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Urban mathematics

May 20, 2009

Zipf's law is another mathematical phenomenon not entirely unrelated to Benford's law (in fact, some think that Benford is a special case of Zipf). (Aside, it's funny how after you discuss something, it seems to pop up everywhere - Kahneman and Tversky would have a lot to say on that, I'm sure.) Zipf's law is [...]

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Visualizing randomness

May 19, 2009

Daniel Becker's diploma dissertation was on the visualization of randomness - finding concrete ways to map the highly abstract idea of random behaviors and patterns. The resulting portfolio is fascinating, even for someone without a statistical background, in particular for the way in which it lends a semblance of order to these inherently chaotic processes. [...]

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F-tests begone!

May 18, 2009

Andrew Gelman just wrote a blog post regarding interaction terms in multiple regression and concludes: You never have to do an F test. Just forget about that stuff! I find it incredibly refreshing when someone (a professor, no less!) is willing to cut through the math and get down to common sense. And I particularly hate [...]

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On graphing horse races

May 8, 2009

In response to Andrew Gelman's call for interesting visualizations of the Kentucky Derby, Megan Pledger created the following graph: I think it's especially interesting because the data is fictional, based on a few simple rules to simulate horse behavior (that's right - this is just like a single realization of a Monte Carlo process!). Andrew [...]

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Monte Carlo: house of cards?

May 8, 2009

The WSJ recently ran apiece on Monte Carlo risk management: Here is how a typical Monte Carlo retirement-planning tool might work: The user enters information about his age, earnings, assets, retirement-plan contributions, investment mix and other details. The calculator crunches the numbers on hundreds or thousands of potential market scenarios, guided by assumptions about inflation, [...]

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A Derivation of Benford's Law or: Roll Your Own Fraud Detector

May 1, 2009

An explanation of Benford's law, which describes how frequently certain first digits should appear.

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On the age of empiricism

May 1, 2009

Caught this on Rortybomb - Barry Eichengreen has penned an excellent piece on the role of models in academia and finance, as well as the growing importance of empiricism (a point with which I particularly empathize).  An excerpt: Maybe so. But amid the pervading sense of gloom and doom, there is at least one reason for [...]

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How to lose your money without really trying

April 27, 2009

An author describes a lose-lose strategy.

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The mysterious case of the SPX spike

April 23, 2009

Get out your tin foil hats, there's something sinister afoot! Zero Hedge, a blog which has been getting an astounding amount of press lately (in particular because of this rumor) posted the following picture this afternoon "without commentary" (please note I recreated their image to use EST times): This is called a volume-at-price chart, or [...]

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QOTD: anecdotal evidence edition

April 21, 2009

Few things bother me more than the use of random or one-off stories as evidence. Reasoning like that does absolutely nothing to sway me, and I'll probably just mumble something about Taleb's Fooled by Randomness. In a somewhat related post, Megan McArdle put it succinctly: The plural of "anecdote" is not "data". Brilliant.

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The math (and myths) of leveraged ETFs

April 20, 2009

Leveraged ETFs are vehicles which provide non-recourse leverage on various sectors or strategies. For example, every day the double-inverse financials SKF returns roughly -2 times the daily return of the DJ Financials index. These products are a favorite of mine not simply in a speculative framework, but in a quantitative one. Many people make the [...]

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FRN's & negative duration

April 16, 2009

Floating rate notes (FRN's) can exhibit a curious property called negative duration.

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How much, statistically speaking, does the NL West suck?

April 15, 2009

Joe Morgan made the following statement on ESPN tonight: The NL West is the only division that hasn't won the World Series in the past seven years. Now, that's amazing. Except, as my brother points out (drawing on his years of accumulated baseball wisdom), there are six divisions. Start with the assumption that each division [...]

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Spurious correlation: fruit edition

April 3, 2009

Who says correlation doesn't imply causality?  Borrowed from In the Pipeline.

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What [not] to read

April 3, 2009

Here are two interesting, if ultimately uninformative, graphics.  The author (artist?) used Facebook to collect data on the most popular books/music at various schools and plotted them against the schools' average SAT score. The first is entitled "BooksThatMakeYouDumb".  One of the most interesting things to me is that the Bible appears twice as "The Holy [...]

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It's never too late for Stats 101

March 26, 2009

Google's Chief Economist, Hal Varian, on jobs in the upcoming decade (emphasis mine): I keep saying the sexy job in the next ten years will be statisticians. People think I’m joking, but who would’ve guessed that computer engineers would’ve been the sexy job of the 1990s? The ability to take data—to be able to understand [...]

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Misreading misleading charts

March 26, 2009

This chart caught my eye because it is potentially misleading (click to zoom).  It shows the year-over-year change in hotel occupancy rates, from 2001-2009. My first impression, on viewing the small chart, was that we haven't hit the low of the last recession.  But (as the box very clearly points out) the low of the [...]

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Correlation

March 11, 2009

Statistics humor: (xkcd via AK's tumblelog)

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All models are wrong

February 27, 2009

George Box, renowned statistician, acutely observed: Essentially, all models are wrong, but some are useful.

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Wilmott on copulas

February 26, 2009

Paul Wilmott has responded ("Copulas and Cults") to the Wired article on copulas I mentioned recently. His tone is grave: "Far more serious, because it extends to all of finance not just to a single model, is the poor education that people get in university financial engineering programs and also the blind-following-the-blind behaviour that is [...]

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Signs of the apocalypse

February 24, 2009

Wired has published an article attacking the Gaussian copula: Recipe for Disaster: The Formula That Killed Wall Street. It's a very typical "hate the game, not the player" article which finds fault with a tool rather than the people who use it. Not that I completely disagree with the critique - but imagine my surprise [...]

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Everything you always wanted to know about desaturation (but weren't bored enough to ask)

February 5, 2009

A casual overview of how color images may be converted to grayscale.

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So you're telling me there's a chance?

January 10, 2009

Reader's Digest has written a brief piece looking at state lottery games and noting that an increased proportion of recession spending is allocated toward these games of chance. Lotteries are excellent laboratories for testing the theories of Israeli psychologist Daniel Kahneman, who won the Nobel prize in economics in 2002.  Kahneman's focus was on the cognitive errors that people [...]

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It's that whole "counting" thing

May 9, 2008

Some people understand math.  Some people don't.

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