Online Guide to Investments and Insurance

A major issue in the literature on empirical market microstructure is the appropriate measure of liquidity. Microstructure theory suggests that the transitory cost plus the price impact of a trade is a good measure of an asset’s liquidity. Brennan and Subrahmanyam (1996) suggest using microstructure data to estimate these cost components, using the Glosten and [...]

Local vocational schools can be particularly helpful in the development and prototyping phase of the inventive process. There are vocational schools for virtually every trade imaginable, from electronics and computers to welding and automotive repair. Students work under the close supervision of their instructors. You can often get a prototype, or a particular part of [...]

Mutual funds are diversified. Diversification is supposed to create steady returns. I simply do not believe it does. Mass psychology reigns in mutual fund investing. By definition, a mutual fund is a herd of mindless investors led by an adored mutual fund manager. Mutual fund complexes promote their newest and hottest fund. Investors pour cash [...]

A few years ago, one of my friends talked me into a 5k “mud run” at the Marine base near us. This was a day that the base let nonmilitary folks come and run the bootcamp obstacle course for prizes. My friend, who plays competitive soccer, left me in the dust after the first mile. [...]

A forecast is not a plan. A forecast has no strategic component. Those real-life plans that are forecasts in disguise are immune to our thesis that total value equals economic value plus strategic value. They are trivial but not uncommon examples of my general thesis and occur when operating the existing business is the sum [...]

If management flexibility, represented by real options, is the key to value creation, logic would seem to tell us that losing flexibility can destroy value. This section will illustrate this point. The first example occurs under command-and-control conditions. In a planned economy, a plant manager may be rewarded only for producing his quota, which he [...]

Suppose we were to run a contest in which a group of 30 individuals were asked to predict the outcomes (heads or tails) on a series of coin flips. After each coin flip, some of the players would drop out because they made the wrong selection. If we continue the experiment until there is one [...]