A Mathematician Plays The Market

Description

In early 2000 John Allen Paulos, celebrated thinker and writer on mathematics, set out to use his insights into areas such as statistics, probability and psychology to examine the maths of the marketplace. However, he soon discovered that playing the market was far more addictive than he had anticipated . . .
This is his fascinating, funny and often excruciating story of how Paulos gambled - and lost - his money in the course of his investigations into the stockmarket: how his 'hot tip' on a company called WorldCom turned out to be a disaster; how, even as the share price started to plummet, he kept on buying; how a usually rational man discovered a ruthless gambling streak; how he kept secret from his wife just how much he had invested; and how he tried to convince himself - using mathematical logic - that everything would be all right.

Author description

John Allen Paulos's previous books include Innumeracy, Beyond Numeracy, A Mathematician Reads the Newspaper, and Once Upon a Number. He is a professor of Mathematics at Temple University, a columnist, and a frequent commentator on the intersection of mathematics, psychology, and everyday life. He lives in Philadelphia, Pennsylvania.

Table of contents

Anticipating others' anticipations: falling in love with WorldCom; being right versus being right about the market; my pedagogical cruelty; common knowledge, jealousy and market sell-offs. Fear, greed and cognitive illusions: averaging down or catching a falling knife?; emotional overreactions and home economics; behavioral finance; psychological foibles, a list; self-fulfilling beliefs and data mining; rumors and online chatrooms; pump and dump, short and distort. Trends, crowds and waves: technical analysis - following the followers; the Euro and the golden ratio; moving averages, big picture; resistance and support and all that; predictability and trends; technical strategies and Blackjack; winning through losing?. Chance and efficient markets: geniuses, idiots or neither; efficiency and random walks; pennies and the perception of pattern; a stock-newsletter scam; decimals and other changes; Benford's law and looking out for number one; the numbers man - a screen treatment. Value investing and fundamental analysis: e is the root of all money; the fundamentalists' creed - you get what you pay for; Ponzi and the irrational discounting of the future; average riches, likely poverty; fat stocks, fat people and P/E; contrarian investing and the "Sports Illustrated" cover jinx; accounting practices; WorldCom's problems. Options, risks and volatility: options and the calls of the wild; the lure of illegal leverage; short-selling, margin buying and familial finances; are insider trading and stock manipulation so bad?; expected value, not value expected. what's normal? not six sigma. Diversifying stock portfolios: a reminiscence and the parable; are stocks less risky than bonds?; the St Petersburg paradox and utility; portfolios - benefiting from the Hatfields and McCoys; diversification and politically incorrect funds; beta - is it better? Connectedness and chaotic price movements: insider trading and subterranean information processing; trading strategies, whim and ant behavior chaos and unpredictability; extreme price movements, power laws and the web; economic disparities and media disproportions. From paradox to complexity: the paradoxical efficient market hypothesis; the prisoner's dilemma and the market; pushing the complexity horizon; game theory and supernatural investor/psychologists; absurd emails and the WorldCom denouement.