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KackToodles
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Joined: August 28th, 2005, 10:46 pm

what do finance practitioners think about agency theory and information economics?

April 19th, 2007, 3:50 pm

QuoteOriginally posted by: twofishI know that Bernt Oksendal is doing some work as to how insider information affects prices and trading strategies, but the focus of that work seems to be public policy (i.e. how can we identify inside trading from trade patterns) rather than for trading. The result of such academic studies are quite predictable: the Professor will write a brilliant paper posing the solution to a problem nobody is interested in and offering dead silence on practical problems of genuine interest.
Last edited by KackToodles on April 18th, 2007, 10:00 pm, edited 1 time in total.
 
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twofish
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what do finance practitioners think about agency theory and information economics?

April 20th, 2007, 12:55 pm

QuoteOriginally posted by: KackToodlesThe result of such academic studies are quite predictable: the Professor will write a brilliant paper posing the solution to a problem nobody is interested in and offering dead silence on practical problems of genuine interest. I think that part of the problem is that in the real world, the lessons of information economics are too simple and obvious for people to make careers out of. For example, if I have inside information on the movement of the stock, the lesson of information economics is that I should use it to make money. Duuuuuhhhhh...... :-) :-) :-)
 
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KackToodles
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Joined: August 28th, 2005, 10:46 pm

what do finance practitioners think about agency theory and information economics?

April 20th, 2007, 2:15 pm

QuoteOriginally posted by: twofishif I have inside information on the movement of the stock, the lesson of information economics is that I should use it to make money. Duuuuuhhhhh...... :-) :-) :-) not quite. the lesson is that you should NOT buy the stock with your own money, but to start a mutual fund with 1,000,000 investors so that you can leverage up the value of your trading. Duuuuhhhhhh. I.E. is simple, but not quite as simple as your "intuition."
 
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flairplay
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what do finance practitioners think about agency theory and information economics?

April 21st, 2007, 9:39 am

QuoteOriginally posted by: KackToodlesQuoteOriginally posted by: Traden4AlphaIts not a matter of math envy, but one of concern about an over-used hammer induced by a peer-review and tenure system that forces researchers to assume that everything is a nail. Flairplay's comment about "dry theory" is, at least partially, deserved. Although economics certainly produces many many "interesting" results, it's less clear that it produces correct results. Heh heh, is anyone who is not aiming for tenure (or a phd) in economics interested in reading dry economics (or business) theory papers?! I bet not. This is evidence how useless 99% of economics theory research is to pracitioners. This is in stark contrast to the "real" sciences and engineering, where the practitioners and engineers in the research labs have to read what the academic professors publish.Could not agree more.In the best areas, practise and theory inter-mix. Finance theory, apart from derivatives modelling, is far off from practise. Very few of the results you come across in academic papers are relevant or insightful. A lot presented as deep result is quite often trivial - and known. A lot is simply wrong or irrelevant.The worst bit is the intellectual theft. The number of times some of us have worked out the whole mathematics as an example to some academic quanty type - and he publishes it shamelessly is not funny.Recently one of my quants mentioned that some quant published something in 2002 - which my guy found interesting. I was at pains to point out that that technique had been in use at least since 1995, and that most traders knew it in detail.A number of these sharks circle looking to grab an idea and publish. They have the time. The rest are busy figuring out, and dealing with, the real stuff.
 
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KackToodles
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Joined: August 28th, 2005, 10:46 pm

what do finance practitioners think about agency theory and information economics?

April 22nd, 2007, 7:14 am

QuoteOriginally posted by: flairplayThe worst bit is the intellectual theft. The number of times some of us have worked out the whole mathematics as an example to some academic quanty type - and he publishes it shamelessly is not funny. To be fair, you are here probably referring to a low level professor publishing in a 3rd tier journal. The top tier journals would not be interested in publishing anything that might actually be so useful that 90% of traders know about it!
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