May

17

 There is a problem with every opportunity.

The following situation enforces the truth of the subject.

A few years ago, I finished decorating a house. It is in a gated and somewhat upscale community of about 400 single or attached houses, built somewhat after 2000 and just at the edge of a big metropolitan area. People here appear to be very wealthy — premium cars are common — some have 2 Mercedeses, 2 BMW's, or 2 Porsches. But please don't over imagine it –by North American standards, this is still way too shabby and crowded. Each 250-450 square-meter house has about 100-200 square meters of yard. Outside the yard, there is some limited public area, in the form of roads, trails, greens, woods, and somewhere, streams and lake. My closest neighbor is about a few yardsticks away.

I was quite excited and happy to move in the community after having stayed in downtown apartments for many years. The city life made me a schedule of going to bed at about 12am and getting up at 8am. One usually has to shut all windows at night just to be quiet. Now at this community, I was thinking that windows can be kept open (in spring, fall or summer) for the night as it is much quieter. There are trees outside and the air is cleaner.

It turned out that some home owners were raising chickens and roosters, and the many roosters crow starting at about 3am. I was shocked and angry, and wondered why other people didn't have problems with it as they moved in a few years earlier than I did. I made quite some effort in talking to property management and also seeking to find and talk with the owners. It got alleviated somewhat but never went away. I was struggling and suffering.

Gradually, partly due to the lack of sleep, I started to turn in earlier. It helped. Now years have passed, I adopted a schedule of going to bed just after 9pm and getting up at 5am, and I am very happy about it. Not only that, I also cut the propagandistic cable service into my house and have not wasted my life on it. In its place, I read more books and play more music.

P.S. there is still one rooster now in the community, but it doesn't bother me much.


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4 Comments so far

  1. Jason on May 18, 2012 1:30 pm

    This is a very random question but somehow it is very important to me. Does Victor know mathematical analysis? Fourier analysis, Measure theory, Lebesgue integration, Ergodic theory etc. If he has such knowledge has he found it applicable to developing trading models?

  2. Curmdugeon 3421 on May 18, 2012 5:55 pm

    A very interesting and appropriate question.

    The things you mention are of two kinds:

    (1) Fourier Analysis is a very practical field with all kinds of applications in Electrical Engineering, Seismology, etc. A lot of electrical engineers have tried to apply it to the prediction of financial markets, but as far as I know with no results. It does not seem to be the right technique for this application.

    (2) The other things you mention are theoretical, foundational kinds of things. The are used to prove theorems in Probability Theory, and are usually prerequisites for advanced courses in Prob/Stats. But they are not in themselves applicable to markets or anything else. Measure Theory for example is needed because the modern definition of probability is that "probability is a measure", but the intuitive understanding of probabilities does not require this; Measure Theory is only needed for rigorous proofs, etc. If you want to learn the BSM theory of options, then you have to take Ito Integration and to take that the professors require that you take Lebesgue Integration first; again it is a prerequisite and not a usable knowledge in itself.

    So what kind of probability and statistics do you need for trading? You need the kind of statistics that working statisticians use to analyze data (especially large, complex and noisy data sets), to evaluate the results of experiments, etc. In other words the practical side of Statistics, not the theoretical side.

    Hope this helps. Let's see what Dr. Niederhoffer says.

  3. Anonymous on May 20, 2012 4:59 am

    by the time vic realized they’re all useless for that purpose, it was too late. he had already done well for himself. but that’s just a testament of the effed world we happen to populate.

  4. vic on May 24, 2012 1:41 pm

    well. the jury is out on this one. Most people who took statistics in graduate school or college are exposed to all these things although measure theory was just being used in probability in my day and I agree with curmudgeon that measure theory here is just icing on the cake for rigor and has no practical value. i dont see why one would do much integration lebesgue or otherwise in markets, that counting and enumeration wouldn't cover exactly. As for ergodic theory, that's the essence and the more probability and random variable stuff you know the better. Most people who use these things in trading are poseurs and cant make money with it. one of my partners was number 1 in country in math in college and would be the first to admit that any advanced techniques like these were useless to him and us. i like what the facebook people said that some of their courses were very hard at harvard because they couldnt just work out the problems on the tests in their head using mathematical principles. my former partner would agree with that and he s written about 200 published papers where he had to work things out for himself and he wouldnt know the first thing about any of the things that are mentioned, although he's probably good at getting the grip around them when a student or co writer explains what the thing is. i thought from the market muse of bonds that the curmudgeon was formerly an attorney. it is impressive that he is so knowledgeable about these high minded things. vic

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