## Modeling a Risk-Averse Investor in the Stock Market Pt. 3: Trying to Find a Closer Approximation for the net value

In this blogpost, I will attempt to find an approximation for the series posted in part 2. In part #2, we had the table:   ROI based upon the period we invested in  (1/r)         Sum of each investment   Period 1 ROI  Period 2 ROI Period 3 ROI Period 4 ROI Period J   *SPECIAL CASE* \$1/1 \$1/1 \$1/1 \$1/1 + … 1+1+1+1 + …  = \$J Investment #1 \$1/2 \$1/4 \$1/8 \$1/16 + … ½ + ¼ + 1/8 + 1/16 + … = \$2.00 Investment #2 \$1/3 \$1/9 \$1/27 \$1/81   + … \$1/3 Continue reading Modeling a Risk-Averse Investor in the Stock Market Pt. 3: Trying to Find a Closer Approximation for the net value

## How to Trade (like a Kindergartener)

There is an infamous book referenced often in my life, having a mother as a devoted kindergarten teacher. And, truly, I live by the words of author Robert Fulghum in that All I Really Need to Know I Learned in Kindergarten. Walking around a Kindergarten classroom is not too far off what I imagine it’s like on the ground of the New York Stock Exchange: bustling individuals running back and forth, disorderly papers with scribbles on the margins, shouting over desired items, and manipulating the market (teacher) for a little extra playtime. Maybe the NYSE could learn a few things from Continue reading How to Trade (like a Kindergartener)

## Modeling a Risk-Averse Investor in the Stock Market Pt. 2:

*This is just a continuation of the first blogpost titled “Modeling a Risk-Averse Investor in the Stock Market Pt. 2”. * Finding an Upper Bound for our Heuristic: To approximate the upper bound, let’s take J –> ∞ and not include the investment# 1 case as it is a special case then we have: Above, we shifted the index of r by 1. It now has to have an initial value of r = 2 insuring the first-rate equals ½. We can make another table to intuitively understand what this represents:   ROI based upon the period we invested in Continue reading Modeling a Risk-Averse Investor in the Stock Market Pt. 2:

## Modeling a Risk-Averse Investor in the Stock Market Pt. 1:

Suppose someone wants to invest in the stock market, how would you approach modeling an individual investing in this asset class? The particular asset class at hand here is stocks. We will make intuitive assumptions about the stock market and how a risk-averse individual operates in the stock market. Then, we will try to transform said assumptions to make a simple heuristic. This heuristic will then generate a numerical value which we will describe in terms being between an upper and lower boundary. Let’s make the assumptions Creating the Assumptions: ROI on stocks to diminish overtime due to increasing market Continue reading Modeling a Risk-Averse Investor in the Stock Market Pt. 1:

## The Drink Exchange

The Drink Exchange is an increasingly popular software being implemented in bars across the world. How it Works Designed to mimic the real-world Stock Market, prices of drinks rise and fall depending on popularity. Television screens across the bar show real time prices of drinks that change by the minute depending on supply and demand. This may be the only market in the world where everyone is hoping for a crash. Promotions As for now, customers are fighting to purchase drinks at the lowest price they can. In the future, however, the company plans to incorporate more Stock Market themed Continue reading The Drink Exchange

## What Increasing the Federal Funds Rate Means for the Stock Market

Since the Great Recession rocked the U.S. and world economy in 2007, the federal funds rate in the U.S. has been at or near zero, falling from its pre-recession level of 5.25%. The hallmark of post-recession years has been the Fed’s strict adherence to low interest rates for fear that raising them could send the United States back into a recession. But now, this period may finally be coming to an end. For the first time in nine years interest rates may be set to climb as Janet Yellen announced at the Fed’s annual Jackson Hole meeting two weeks ago Continue reading What Increasing the Federal Funds Rate Means for the Stock Market

## Signaling and the Dutch East India Company

About a month ago, NPR’s podcast planet money aired an episode on shorting the stock market, and specifically, the very first short in the stock market. This may be one of my very favorite episodes they’ve ever done, for two reasons. The first reason is that it represents the beginning of a very interesting (albeit dangerous) phenomenon in the stock market. The second is how signaling gave birth to many of the features of the modern stock market. This second part is interesting, and I’d like to give some explanation as to how it works, and then, how it birthed Continue reading Signaling and the Dutch East India Company