10 October 2017: Richard Thaler

Yesterday, the Nobel economics prize was awarded to Richard Thaler of the University of Chicago for research showing how people’s choices on economic matters are not always rational. Thaler is considered one of the founding fathers of behavioral economics. He made a cameo appearance in the movie The Big Short, in which he explained the ‘hot-hand fallacy‘: the sometimes fallacious belief that a person who has experienced success with a seemingly random event has a greater chance of further success in additional attempts. With the stock markets reaching record highs, the moment to reward professor Thaler the Nobel economics prize could not have been more appropriate.

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US stock markets closed lower on Monday. Investors did not find any evidence to lift the major indices to new records highs. The Dow lost 0.06%, the S&P 500 closed 0.18% lower and the NASDAQ dropped 0.16%. Volatility left the single digits: the VIX gained more than 7% and closed at 10.33 points. UVXY ETFs followed suit and closed more than 4% higher. XIV ETNs lost almost 2%.
Danny Daredevil profited from the rise in volatility. His RSS rose to 32%. Adventurous Anny is still holding cash. Her RSS remained at 9%. Solid Suzy and Lazy Larry had to take a step back. Their RSS dropped to 51%. Their AAR is still at 100%.
None of our models gave a trading signal at the end of yesterday’s session.

Model  Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil UVXY 1 January 2016

32.12%

-67.23%

-5.17%

17%

Adventurous Anny Cash 6 March 2017

9.22%

9.22%

0.67%

16%

Solid Suzy XIV 6 March 2017

51.17%

51.17%

3.34%

100%

Lazy Larry
XIV 6 March 2017

51.17%

51.17%

3.34%

100%

RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return

 

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The tendency of an event to occur
varies inversely with one’s preparation for it.
― David Searls

 

 

Picture of Richard Thaler: still from The Big Short