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RE: Fw: [Behavioral-Finance] Recession

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  • Bob Bronson
    The bias that I pointed out is the result of the provable fact that virtually all trades are based upon at least some common information, especially with
    Message 1 of 28 , Nov 30, 2001
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      The bias that I pointed out is the result of the provable
      fact that virtually all trades are based upon at least
      some common information, especially with emphasis placed
      upon recent price cycle-trend. Have you ever worked at
      a trading desk, or on exchange floor?

      A theory of non-overlapping "disperse information" maybe
      an interesting academic polemic, but it doesn't reflect
      what traders and investors think and do.

      Upon further consideration, I would even argue it is both
      necessary and sufficient for fully discounted information
      to lead to both the self-fulfilling and self-defeating
      aspect of cycle-trends.

      In any case, time series correlations of prices and
      various quantified sentiment measures prove "herding"
      always leads to reversion-to-the-extreme in cycle-trends.
      This becomes obvious when one works with these things on
      a multi-time-horizon basis: hourly, daily, weekly, monthly,
      quarter, yearly and even longer like BAAC Supercycles.

      Don't you agree that supported, or supportable, absolute
      statements are more useful than unsupported conjectures?

      Even if one attempts to prove the aggregate of all players
      is a zero-sum game, don't you agree that such a proof will
      will have little bearing on the stronger condition that it
      is a zero-sum game for each agent individually? Of course,
      if the stronger condition could be proved, then the weaker
      one would be true, but that approach is fruitless since
      thousands if not millions walk away ahead of the game.


      -----Original Message-----
      From: Peter R. Locke [mailto:plocke@...]
      Sent: Friday, November 30, 2001 10:46 AM
      To: Behavioral-Finance@yahoogroups.com
      Subject: RE: Fw: [Behavioral-Finance] Recession


      I did not introduce bias in my framework....I was discussing a disperse
      information idea, rather than common information, and trading being
      necessary to reveal the idiosyncratic information, and if so it may be worth
      mimmicking, depending on how noisy the information signals are. Imagine a
      situation where two travelers from southern illinois take different paths to
      get to chicago, passing by farm after farm of soybean and corn. When they
      arrive, they each have some independent information about the crops. They
      trade futures, and their trading reveals to other traders, in a noisy way,
      obviously, what they have seen. I think this is kind of like the
      Grossman-Stiglitz model. If trading does not cause prices to fully adjust,
      then it may be (may be may be may be) under certain conditions, rational for
      some other bystanders to also trade, until the information is fully
      revealed. It is not necessary that there be overreaction due to the
      herding, though that is one outcome in some situations.

      But thats just the naive academic emerging again, trying to temper these
      absolute statements that eminate from the professionals...Perhaps there is
      no information in the real world, just traders chasing each other's tails,
      for no real purpose whatsoever, simply a big zero sum game. \

      -----Original Message-----
      From: Bob Bronson [mailto:bob@...]
      Sent: Friday, November 30, 2001 12:28 PM
      To: Behavioral-Finance@yahoogroups.com
      Subject: RE: Fw: [Behavioral-Finance] Recession


      No, Peter, multiple trades makes it trend-following
      since each trade has a similar bias, which is both
      immediately self-fulfilling, causing the trend, and
      eventually its exhaustion becomes self-defeating.

      Bob Bronson
      Bronson Capital Markets Research



      -----Original Message-----
      From: Peter R. Locke [mailto:plocke@...]
      Sent: Friday, November 30, 2001 8:46 AM
      To: Behavioral-Finance@yahoogroups.com
      Subject: RE: Fw: [Behavioral-Finance] Recession


      Herding may be rational...it works for the gazelle and the zebra. Relates
      to an efficient signal extraction and asymmetric information framework. If
      you know something and I know something, and I think your know something,
      and you think I know something, and we reveal this knowledge by trading, it
      might behoove us (herd pun intended) to follow each other. Note it is
      trade, not trend, following.

      -----Original Message-----
      From: Bob Bronson [mailto:bob@...]
      Sent: Friday, November 30, 2001 10:33 AM
      To: Behavioral-Finance@yahoogroups.com
      Subject: RE: Fw: [Behavioral-Finance] Recession


      Don't confuse "current" relative sales and earnings
      growth superiority with "future" stock prices. Such
      fully-recognized fundamentals cause overvaluation and
      some of these are the best short sales candidates -
      right now!

      The BF application here is trend-following or "herding"
      as everybody knows these current fundamentals and as a
      result, they are already fully invested in these areas
      and therefore these stocks are over owned "today".

      Our research suggests this bearish sector view will become
      very clear over the next several months, and quarters.

      Bob Bronson
      Bronson Capital Markets Research


      -----Original Message-----
      From: leif_ericssen@... [mailto:leif_ericssen@...]
      Sent: Thursday, November 29, 2001 3:57 PM
      To: Behavioral-Finance@yahoogroups.com
      Subject: Re: Fw: [Behavioral-Finance] Recession


      (Speaking from the US) consumer staples and health care are not
      highly affected by a recession, but investors know that.

      Some banking and other financial services can still be profitable,
      too, and that may not be fully discounted by markets.

      At this point, some transportation stocks may be worthwhile, since
      transportation firms will be early in the economic recovery and they
      have adapted to disruption in other places with things like war and
      terrorism.

      For any cyclical or seasonal consumer goods, I would look for firms
      with above average sales/inventory (or with a sales/inventory
      declining less than average)

      I don't know if that is what you mean by a BF way of approaching
      investing? Personally, I haven't gone into "top-down" industry
      analysis in investing before, these are just ideas I offered. Right
      now, I'm probably looking most at smaller growth firms in stock
      selection FWIW.

      Regards,
      Jan

      --- In Behavioral-Finance@y..., "HPB" <bobbymilk1@h...> wrote:
      > Hello everybody,
      >
      > Nobody from the list answered me when I posted the following
      message. Maybe my wondering wasn't interesting but it is getting more
      and more accurate, isn't it ?
      >
      > ps: I don't need the answer any more, it is just for fun. Thanks
      for your "theories sharing" anyway.
      >
      > ----- Original Message -----
      > From: Bobby Milk
      > To: Behavioral-Finance@y...
      > Sent: Thursday, April 05, 2001 7:15 AM
      > Subject: Fw: [Behavioral-Finance] Recession
      >
      >
      >
      >
      > Hi everybody,
      >
      > I am looking for a piece of information and I am convinced that
      some of the "top notch" people from this list will be able to help me.
      >
      > Mispricing means to exploit an anomaly regarding the traditional
      EMH approach that is economically valuable (including transaction
      costs and risk aversion).
      > If we assume a recession, exploiting this fact by investing in
      firms which business isn't correlated with GNP (or negatively
      correlated, if any) or investing in any firms (that I would like to
      identify) able to "outperform" in such an economic environment, can
      it be approached in a Behavioral Finance way ???
      >
      >
      > Thanks for your help, and thanks for your everyday "knowledge and
      ideas sharing"...
      >
      > P.S.: Excuse my French !!!
      >
      > HPB.
      >
      >
      >
      >
      > ---
      > Outgoing mail is certified Virus Free.
      > Checked by AVG anti-virus system (http://www.grisoft.com).
      > Version: 6.0.295 / Virus Database: 159 - Release Date: 01/11/2001



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    • Peter R. Locke
      What trades are you talking about??? You are clearly mistaking your trading world for the problems faced by social scientists of modeling. Modeling involves
      Message 2 of 28 , Dec 1, 2001
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        What trades are you talking about??? You are clearly mistaking your trading
        world for the problems faced by social scientists of modeling. Modeling
        involves forming a system of assumptions, leading to logical conclusions
        which may then be tested. This in order to escape the problem of
        parochialism to which we are all burdened, being biased by our surroundings,
        current events, etc.
        It is this disconnect between the practitioner and scientist that seems to
        really bug you. The scientist is trying to look at the bigger picture, at
        least I think so. I get the feeling that you have no role for science, and
        would just as soon see it disappear. This, I believe, ignores the manifold
        contributions of science.

        The logic of science is that cases do not prove a point. Science is the art
        of testing theories and disproving. No one proves anything except in
        mathematics, which is why there is no nobel prize in math, it is not a
        science. We don't prove the world is round, we prove it is not flat.
        Absolute statements imply some meta-scientific knowledge, such as a belief
        in creationsism, rather than a scientific examination. The fact that
        someone makes money trading, for example, does not prove that markets are
        inefficient. This seems to be a big problem for traders, who feel that when
        they make money it proves market inefficiency. But we've gone around on
        this one before.

        By the way, while I have not been on a trading desk, in my work in
        litigation I have been in contact, helped depose, and otherwise dealt with
        many traders, back office folks, exchange officials, regulators, etc. This
        I consider an invaluable source of information, of which I'm sure you'ld
        agree.


        -----Original Message-----
        From: Bob Bronson [mailto:bob@...]
        Sent: Friday, November 30, 2001 8:06 PM
        To: Behavioral-Finance@yahoogroups.com
        Subject: RE: Fw: [Behavioral-Finance] Recession


        The bias that I pointed out is the result of the provable
        fact that virtually all trades are based upon at least
        some common information, especially with emphasis placed
        upon recent price cycle-trend. Have you ever worked at
        a trading desk, or on exchange floor?

        A theory of non-overlapping "disperse information" maybe
        an interesting academic polemic, but it doesn't reflect
        what traders and investors think and do.

        Upon further consideration, I would even argue it is both
        necessary and sufficient for fully discounted information
        to lead to both the self-fulfilling and self-defeating
        aspect of cycle-trends.

        In any case, time series correlations of prices and
        various quantified sentiment measures prove "herding"
        always leads to reversion-to-the-extreme in cycle-trends.
        This becomes obvious when one works with these things on
        a multi-time-horizon basis: hourly, daily, weekly, monthly,
        quarter, yearly and even longer like BAAC Supercycles.

        Don't you agree that supported, or supportable, absolute
        statements are more useful than unsupported conjectures?

        Even if one attempts to prove the aggregate of all players
        is a zero-sum game, don't you agree that such a proof will
        will have little bearing on the stronger condition that it
        is a zero-sum game for each agent individually? Of course,
        if the stronger condition could be proved, then the weaker
        one would be true, but that approach is fruitless since
        thousands if not millions walk away ahead of the game.


        -----Original Message-----
        From: Peter R. Locke [mailto:plocke@...]
        Sent: Friday, November 30, 2001 10:46 AM
        To: Behavioral-Finance@yahoogroups.com
        Subject: RE: Fw: [Behavioral-Finance] Recession


        I did not introduce bias in my framework....I was discussing a disperse
        information idea, rather than common information, and trading being
        necessary to reveal the idiosyncratic information, and if so it may be worth
        mimmicking, depending on how noisy the information signals are. Imagine a
        situation where two travelers from southern illinois take different paths to
        get to chicago, passing by farm after farm of soybean and corn. When they
        arrive, they each have some independent information about the crops. They
        trade futures, and their trading reveals to other traders, in a noisy way,
        obviously, what they have seen. I think this is kind of like the
        Grossman-Stiglitz model. If trading does not cause prices to fully adjust,
        then it may be (may be may be may be) under certain conditions, rational for
        some other bystanders to also trade, until the information is fully
        revealed. It is not necessary that there be overreaction due to the
        herding, though that is one outcome in some situations.

        But thats just the naive academic emerging again, trying to temper these
        absolute statements that eminate from the professionals...Perhaps there is
        no information in the real world, just traders chasing each other's tails,
        for no real purpose whatsoever, simply a big zero sum game. \

        -----Original Message-----
        From: Bob Bronson [mailto:bob@...]
        Sent: Friday, November 30, 2001 12:28 PM
        To: Behavioral-Finance@yahoogroups.com
        Subject: RE: Fw: [Behavioral-Finance] Recession


        No, Peter, multiple trades makes it trend-following
        since each trade has a similar bias, which is both
        immediately self-fulfilling, causing the trend, and
        eventually its exhaustion becomes self-defeating.

        Bob Bronson
        Bronson Capital Markets Research



        -----Original Message-----
        From: Peter R. Locke [mailto:plocke@...]
        Sent: Friday, November 30, 2001 8:46 AM
        To: Behavioral-Finance@yahoogroups.com
        Subject: RE: Fw: [Behavioral-Finance] Recession


        Herding may be rational...it works for the gazelle and the zebra. Relates
        to an efficient signal extraction and asymmetric information framework. If
        you know something and I know something, and I think your know something,
        and you think I know something, and we reveal this knowledge by trading, it
        might behoove us (herd pun intended) to follow each other. Note it is
        trade, not trend, following.

        -----Original Message-----
        From: Bob Bronson [mailto:bob@...]
        Sent: Friday, November 30, 2001 10:33 AM
        To: Behavioral-Finance@yahoogroups.com
        Subject: RE: Fw: [Behavioral-Finance] Recession


        Don't confuse "current" relative sales and earnings
        growth superiority with "future" stock prices. Such
        fully-recognized fundamentals cause overvaluation and
        some of these are the best short sales candidates -
        right now!

        The BF application here is trend-following or "herding"
        as everybody knows these current fundamentals and as a
        result, they are already fully invested in these areas
        and therefore these stocks are over owned "today".

        Our research suggests this bearish sector view will become
        very clear over the next several months, and quarters.

        Bob Bronson
        Bronson Capital Markets Research


        -----Original Message-----
        From: leif_ericssen@... [mailto:leif_ericssen@...]
        Sent: Thursday, November 29, 2001 3:57 PM
        To: Behavioral-Finance@yahoogroups.com
        Subject: Re: Fw: [Behavioral-Finance] Recession


        (Speaking from the US) consumer staples and health care are not
        highly affected by a recession, but investors know that.

        Some banking and other financial services can still be profitable,
        too, and that may not be fully discounted by markets.

        At this point, some transportation stocks may be worthwhile, since
        transportation firms will be early in the economic recovery and they
        have adapted to disruption in other places with things like war and
        terrorism.

        For any cyclical or seasonal consumer goods, I would look for firms
        with above average sales/inventory (or with a sales/inventory
        declining less than average)

        I don't know if that is what you mean by a BF way of approaching
        investing? Personally, I haven't gone into "top-down" industry
        analysis in investing before, these are just ideas I offered. Right
        now, I'm probably looking most at smaller growth firms in stock
        selection FWIW.

        Regards,
        Jan

        --- In Behavioral-Finance@y..., "HPB" <bobbymilk1@h...> wrote:
        > Hello everybody,
        >
        > Nobody from the list answered me when I posted the following
        message. Maybe my wondering wasn't interesting but it is getting more
        and more accurate, isn't it ?
        >
        > ps: I don't need the answer any more, it is just for fun. Thanks
        for your "theories sharing" anyway.
        >
        > ----- Original Message -----
        > From: Bobby Milk
        > To: Behavioral-Finance@y...
        > Sent: Thursday, April 05, 2001 7:15 AM
        > Subject: Fw: [Behavioral-Finance] Recession
        >
        >
        >
        >
        > Hi everybody,
        >
        > I am looking for a piece of information and I am convinced that
        some of the "top notch" people from this list will be able to help me.
        >
        > Mispricing means to exploit an anomaly regarding the traditional
        EMH approach that is economically valuable (including transaction
        costs and risk aversion).
        > If we assume a recession, exploiting this fact by investing in
        firms which business isn't correlated with GNP (or negatively
        correlated, if any) or investing in any firms (that I would like to
        identify) able to "outperform" in such an economic environment, can
        it be approached in a Behavioral Finance way ???
        >
        >
        > Thanks for your help, and thanks for your everyday "knowledge and
        ideas sharing"...
        >
        > P.S.: Excuse my French !!!
        >
        > HPB.
        >
        >
        >
        >
        > ---
        > Outgoing mail is certified Virus Free.
        > Checked by AVG anti-virus system (http://www.grisoft.com).
        > Version: 6.0.295 / Virus Database: 159 - Release Date: 01/11/2001



        you may unsubscribe by sending an email to

        Behavioral-Finance-unsubscribe@yahoogroups.com


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        you may unsubscribe by sending an email to

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      • Dalton Mota
        Great post Peter. I do agree with most of what you wrote about science. Actually, i think of behavioural finance as the science (or the art) of reading the
        Message 3 of 28 , Dec 1, 2001
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          Great post Peter.
          I do agree with most of what you wrote about science.
          Actually, i think of behavioural finance as the
          science (or the art) of reading the human collective
          mind, as an interpretative process of the decisions of
          the agents and the price (or value) changes emerging
          from them. As one is an economic agent, the most
          difficult part of the analysis is the following
          question : Is my filter to reality the same of the
          "market" ? So that one can build logical hypotesis and
          test them, with the underlying goal that is make
          money.

          --- "Peter R. Locke" <plocke@...>
          > What trades are you talking about??? You are
          > clearly mistaking your trading
          > world for the problems faced by social scientists of
          > modeling. Modeling
          > involves forming a system of assumptions, leading to
          > logical conclusions
          > which may then be tested. This in order to escape
          > the problem of
          > parochialism to which we are all burdened, being
          > biased by our surroundings,
          > current events, etc.
          > It is this disconnect between the practitioner and
          > scientist that seems to
          > really bug you. The scientist is trying to look at
          > the bigger picture, at
          > least I think so. I get the feeling that you have
          > no role for science, and
          > would just as soon see it disappear. This, I
          > believe, ignores the manifold
          > contributions of science.
          >
          > The logic of science is that cases do not prove a
          > point. Science is the art
          > of testing theories and disproving. No one proves
          > anything except in
          > mathematics, which is why there is no nobel prize in
          > math, it is not a
          > science. We don't prove the world is round, we
          > prove it is not flat.
          > Absolute statements imply some meta-scientific
          > knowledge, such as a belief
          > in creationsism, rather than a scientific
          > examination. The fact that
          > someone makes money trading, for example, does not
          > prove that markets are
          > inefficient. This seems to be a big problem for
          > traders, who feel that when
          > they make money it proves market inefficiency. But
          > we've gone around on
          > this one before.
          >
          > By the way, while I have not been on a trading desk,
          > in my work in
          > litigation I have been in contact, helped depose,
          > and otherwise dealt with
          > many traders, back office folks, exchange officials,
          > regulators, etc. This
          > I consider an invaluable source of information, of
          > which I'm sure you'ld
          > agree.
          >
          >
          > -----Original Message-----
          > From: Bob Bronson [mailto:bob@...]
          > Sent: Friday, November 30, 2001 8:06 PM
          > To: Behavioral-Finance@yahoogroups.com
          > Subject: RE: Fw: [Behavioral-Finance] Recession
          >
          >
          > The bias that I pointed out is the result of the
          > provable
          > fact that virtually all trades are based upon at
          > least
          > some common information, especially with emphasis
          > placed
          > upon recent price cycle-trend. Have you ever worked
          > at
          > a trading desk, or on exchange floor?
          >
          > A theory of non-overlapping "disperse information"
          > maybe
          > an interesting academic polemic, but it doesn't
          > reflect
          > what traders and investors think and do.
          >
          > Upon further consideration, I would even argue it is
          > both
          > necessary and sufficient for fully discounted
          > information
          > to lead to both the self-fulfilling and
          > self-defeating
          > aspect of cycle-trends.
          >
          > In any case, time series correlations of prices and
          > various quantified sentiment measures prove
          > "herding"
          > always leads to reversion-to-the-extreme in
          > cycle-trends.
          > This becomes obvious when one works with these
          > things on
          > a multi-time-horizon basis: hourly, daily, weekly,
          > monthly,
          > quarter, yearly and even longer like BAAC
          > Supercycles.
          >
          > Don't you agree that supported, or supportable,
          > absolute
          > statements are more useful than unsupported
          > conjectures?
          >
          > Even if one attempts to prove the aggregate of all
          > players
          > is a zero-sum game, don't you agree that such a
          > proof will
          > will have little bearing on the stronger condition
          > that it
          > is a zero-sum game for each agent individually? Of
          > course,
          > if the stronger condition could be proved, then the
          > weaker
          > one would be true, but that approach is fruitless
          > since
          > thousands if not millions walk away ahead of the
          > game.
          >
          >
          > -----Original Message-----
          > From: Peter R. Locke [mailto:plocke@...]
          > Sent: Friday, November 30, 2001 10:46 AM
          > To: Behavioral-Finance@yahoogroups.com
          > Subject: RE: Fw: [Behavioral-Finance] Recession
          >
          >
          > I did not introduce bias in my framework....I was
          > discussing a disperse
          > information idea, rather than common information,
          > and trading being
          > necessary to reveal the idiosyncratic information,
          > and if so it may be worth
          > mimmicking, depending on how noisy the information
          > signals are. Imagine a
          > situation where two travelers from southern illinois
          > take different paths to
          > get to chicago, passing by farm after farm of
          > soybean and corn. When they
          > arrive, they each have some independent information
          > about the crops. They
          > trade futures, and their trading reveals to other
          > traders, in a noisy way,
          > obviously, what they have seen. I think this is
          > kind of like the
          > Grossman-Stiglitz model. If trading does not cause
          > prices to fully adjust,
          > then it may be (may be may be may be) under certain
          > conditions, rational for
          > some other bystanders to also trade, until the
          > information is fully
          > revealed. It is not necessary that there be
          > overreaction due to the
          > herding, though that is one outcome in some
          > situations.
          >
          > But thats just the naive academic emerging again,
          > trying to temper these
          > absolute statements that eminate from the
          > professionals...Perhaps there is
          > no information in the real world, just traders
          > chasing each other's tails,
          > for no real purpose whatsoever, simply a big zero
          > sum game. \
          >
          > -----Original Message-----
          > From: Bob Bronson [mailto:bob@...]
          > Sent: Friday, November 30, 2001 12:28 PM
          > To: Behavioral-Finance@yahoogroups.com
          > Subject: RE: Fw: [Behavioral-Finance] Recession
          >
          >
          > No, Peter, multiple trades makes it trend-following
          > since each trade has a similar bias, which is both
          > immediately self-fulfilling, causing the trend, and
          > eventually its exhaustion becomes self-defeating.
          >
          > Bob Bronson
          > Bronson Capital Markets Research
          >
          >
          >
          > -----Original Message-----
          > From: Peter R. Locke [mailto:plocke@...]
          > Sent: Friday, November 30, 2001 8:46 AM
          > To: Behavioral-Finance@yahoogroups.com
          > Subject: RE: Fw: [Behavioral-Finance] Recession
          >
          >
          > Herding may be rational...it works for the gazelle
          > and the zebra. Relates
          > to an efficient signal extraction and asymmetric
          > information framework. If
          > you know something and I know something, and I think
          > your know something,
          > and you think I know something, and we reveal this
          > knowledge by trading, it
          > might behoove us (herd pun intended) to follow each
          > other. Note it is
          > trade, not trend, following.
          >
          > -----Original Message-----
          > From: Bob Bronson [mailto:bob@...]
          > Sent: Friday, November 30, 2001 10:33 AM
          > To: Behavioral-Finance@yahoogroups.com
          >
          === message truncated ===

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        • Bob Bronson
          Q What trades are you talking about??? A Trades in your theory of non-overlapping disperse information as I explained. Your personalistic evaluations are -
          Message 4 of 28 , Dec 1, 2001
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          • 0 Attachment
            Q "What trades are you talking about???"
            A Trades in your theory of non-overlapping "disperse
            information" as I explained.

            Your personalistic evaluations are - again - wrong.

            I'm not a trader, as I thoroughly explained before,
            even if I have knowledge about trading. We are known
            for our predictive modeling work in capital markets.
            What you confuse is my intolerance for conjecture
            that is not supported. I have sent you some of our
            work, and as yet, have not received any comment -
            meaningful or otherwise. Where's your work, as I
            would be more than pleased to critique it.

            Are you even incapable of critiquing ideas that are
            contrary to your own? Are you only interested in
            determining whether some is worthy of your self-
            worshipping brotherhood or not?

            You should avoid trying to assert math is not a
            science, which certainly is not why math is why
            the Nobel Foundation doesn't do math. If you
            would like, we could submit your theory to them
            for comment, as I'm sure they would be even more
            anxious for the opportunity to correct your, and
            perhaps others, misapprehension in this regard.

            We are in constant contact with many academics,
            so that is not a problem bridge to cross for us.
            The only thing that is bugging me in this issue
            is your non-responses to the issues at hand.

            Please try harder to discuss the issues, at least
            so that I don't feel so compelled to respond to
            your wrongheaded, if not meanspirited personalistic
            comments.

            Sincerely,

            Bob Bronson
            Bronson Capital Markets Research


            -----Original Message-----
            From: Peter R. Locke [mailto:plocke@...]
            Sent: Saturday, December 01, 2001 7:47 AM
            To: Behavioral-Finance@yahoogroups.com
            Subject: RE: Fw: [Behavioral-Finance] Recession


            What trades are you talking about??? You are clearly mistaking your trading
            world for the problems faced by social scientists of modeling. Modeling
            involves forming a system of assumptions, leading to logical conclusions
            which may then be tested. This in order to escape the problem of
            parochialism to which we are all burdened, being biased by our surroundings,
            current events, etc.
            It is this disconnect between the practitioner and scientist that seems to
            really bug you. The scientist is trying to look at the bigger picture, at
            least I think so. I get the feeling that you have no role for science, and
            would just as soon see it disappear. This, I believe, ignores the manifold
            contributions of science.

            The logic of science is that cases do not prove a point. Science is the art
            of testing theories and disproving. No one proves anything except in
            mathematics, which is why there is no nobel prize in math, it is not a
            science. We don't prove the world is round, we prove it is not flat.
            Absolute statements imply some meta-scientific knowledge, such as a belief
            in creationsism, rather than a scientific examination. The fact that
            someone makes money trading, for example, does not prove that markets are
            inefficient. This seems to be a big problem for traders, who feel that when
            they make money it proves market inefficiency. But we've gone around on
            this one before.

            By the way, while I have not been on a trading desk, in my work in
            litigation I have been in contact, helped depose, and otherwise dealt with
            many traders, back office folks, exchange officials, regulators, etc. This
            I consider an invaluable source of information, of which I'm sure you'ld
            agree.


            -----Original Message-----
            From: Bob Bronson [mailto:bob@...]
            Sent: Friday, November 30, 2001 8:06 PM
            To: Behavioral-Finance@yahoogroups.com
            Subject: RE: Fw: [Behavioral-Finance] Recession


            The bias that I pointed out is the result of the provable
            fact that virtually all trades are based upon at least
            some common information, especially with emphasis placed
            upon recent price cycle-trend. Have you ever worked at
            a trading desk, or on exchange floor?

            A theory of non-overlapping "disperse information" maybe
            an interesting academic polemic, but it doesn't reflect
            what traders and investors think and do.

            Upon further consideration, I would even argue it is both
            necessary and sufficient for fully discounted information
            to lead to both the self-fulfilling and self-defeating
            aspect of cycle-trends.

            In any case, time series correlations of prices and
            various quantified sentiment measures prove "herding"
            always leads to reversion-to-the-extreme in cycle-trends.
            This becomes obvious when one works with these things on
            a multi-time-horizon basis: hourly, daily, weekly, monthly,
            quarter, yearly and even longer like BAAC Supercycles.

            Don't you agree that supported, or supportable, absolute
            statements are more useful than unsupported conjectures?

            Even if one attempts to prove the aggregate of all players
            is a zero-sum game, don't you agree that such a proof will
            will have little bearing on the stronger condition that it
            is a zero-sum game for each agent individually? Of course,
            if the stronger condition could be proved, then the weaker
            one would be true, but that approach is fruitless since
            thousands if not millions walk away ahead of the game.


            -----Original Message-----
            From: Peter R. Locke [mailto:plocke@...]
            Sent: Friday, November 30, 2001 10:46 AM
            To: Behavioral-Finance@yahoogroups.com
            Subject: RE: Fw: [Behavioral-Finance] Recession


            I did not introduce bias in my framework....I was discussing a disperse
            information idea, rather than common information, and trading being
            necessary to reveal the idiosyncratic information, and if so it may be worth
            mimmicking, depending on how noisy the information signals are. Imagine a
            situation where two travelers from southern illinois take different paths to
            get to chicago, passing by farm after farm of soybean and corn. When they
            arrive, they each have some independent information about the crops. They
            trade futures, and their trading reveals to other traders, in a noisy way,
            obviously, what they have seen. I think this is kind of like the
            Grossman-Stiglitz model. If trading does not cause prices to fully adjust,
            then it may be (may be may be may be) under certain conditions, rational for
            some other bystanders to also trade, until the information is fully
            revealed. It is not necessary that there be overreaction due to the
            herding, though that is one outcome in some situations.

            But thats just the naive academic emerging again, trying to temper these
            absolute statements that eminate from the professionals...Perhaps there is
            no information in the real world, just traders chasing each other's tails,
            for no real purpose whatsoever, simply a big zero sum game. \

            -----Original Message-----
            From: Bob Bronson [mailto:bob@...]
            Sent: Friday, November 30, 2001 12:28 PM
            To: Behavioral-Finance@yahoogroups.com
            Subject: RE: Fw: [Behavioral-Finance] Recession


            No, Peter, multiple trades makes it trend-following
            since each trade has a similar bias, which is both
            immediately self-fulfilling, causing the trend, and
            eventually its exhaustion becomes self-defeating.

            Bob Bronson
            Bronson Capital Markets Research



            -----Original Message-----
            From: Peter R. Locke [mailto:plocke@...]
            Sent: Friday, November 30, 2001 8:46 AM
            To: Behavioral-Finance@yahoogroups.com
            Subject: RE: Fw: [Behavioral-Finance] Recession


            Herding may be rational...it works for the gazelle and the zebra. Relates
            to an efficient signal extraction and asymmetric information framework. If
            you know something and I know something, and I think your know something,
            and you think I know something, and we reveal this knowledge by trading, it
            might behoove us (herd pun intended) to follow each other. Note it is
            trade, not trend, following.

            -----Original Message-----
            From: Bob Bronson [mailto:bob@...]
            Sent: Friday, November 30, 2001 10:33 AM
            To: Behavioral-Finance@yahoogroups.com
            Subject: RE: Fw: [Behavioral-Finance] Recession


            Don't confuse "current" relative sales and earnings
            growth superiority with "future" stock prices. Such
            fully-recognized fundamentals cause overvaluation and
            some of these are the best short sales candidates -
            right now!

            The BF application here is trend-following or "herding"
            as everybody knows these current fundamentals and as a
            result, they are already fully invested in these areas
            and therefore these stocks are over owned "today".

            Our research suggests this bearish sector view will become
            very clear over the next several months, and quarters.

            Bob Bronson
            Bronson Capital Markets Research


            -----Original Message-----
            From: leif_ericssen@... [mailto:leif_ericssen@...]
            Sent: Thursday, November 29, 2001 3:57 PM
            To: Behavioral-Finance@yahoogroups.com
            Subject: Re: Fw: [Behavioral-Finance] Recession


            (Speaking from the US) consumer staples and health care are not
            highly affected by a recession, but investors know that.

            Some banking and other financial services can still be profitable,
            too, and that may not be fully discounted by markets.

            At this point, some transportation stocks may be worthwhile, since
            transportation firms will be early in the economic recovery and they
            have adapted to disruption in other places with things like war and
            terrorism.

            For any cyclical or seasonal consumer goods, I would look for firms
            with above average sales/inventory (or with a sales/inventory
            declining less than average)

            I don't know if that is what you mean by a BF way of approaching
            investing? Personally, I haven't gone into "top-down" industry
            analysis in investing before, these are just ideas I offered. Right
            now, I'm probably looking most at smaller growth firms in stock
            selection FWIW.

            Regards,
            Jan

            --- In Behavioral-Finance@y..., "HPB" <bobbymilk1@h...> wrote:
            > Hello everybody,
            >
            > Nobody from the list answered me when I posted the following
            message. Maybe my wondering wasn't interesting but it is getting more
            and more accurate, isn't it ?
            >
            > ps: I don't need the answer any more, it is just for fun. Thanks
            for your "theories sharing" anyway.
            >
            > ----- Original Message -----
            > From: Bobby Milk
            > To: Behavioral-Finance@y...
            > Sent: Thursday, April 05, 2001 7:15 AM
            > Subject: Fw: [Behavioral-Finance] Recession
            >
            >
            >
            >
            > Hi everybody,
            >
            > I am looking for a piece of information and I am convinced that
            some of the "top notch" people from this list will be able to help me.
            >
            > Mispricing means to exploit an anomaly regarding the traditional
            EMH approach that is economically valuable (including transaction
            costs and risk aversion).
            > If we assume a recession, exploiting this fact by investing in
            firms which business isn't correlated with GNP (or negatively
            correlated, if any) or investing in any firms (that I would like to
            identify) able to "outperform" in such an economic environment, can
            it be approached in a Behavioral Finance way ???
            >
            >
            > Thanks for your help, and thanks for your everyday "knowledge and
            ideas sharing"...
            >
            > P.S.: Excuse my French !!!
            >
            > HPB.
            >
            >
            >
            >
            > ---
            > Outgoing mail is certified Virus Free.
            > Checked by AVG anti-virus system (http://www.grisoft.com).
            > Version: 6.0.295 / Virus Database: 159 - Release Date: 01/11/2001



            you may unsubscribe by sending an email to

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          • Peter R. Locke
            ... From: Bob Bronson [mailto:bob@bronsons.com] Sent: Saturday, December 01, 2001 2:21 PM To: Behavioral-Finance@yahoogroups.com Subject: RE: Fw:
            Message 5 of 28 , Dec 1, 2001
            View Source
            • 0 Attachment
              ????????????????????????????????

              -----Original Message-----
              From: Bob Bronson [mailto:bob@...]
              Sent: Saturday, December 01, 2001 2:21 PM
              To: Behavioral-Finance@yahoogroups.com
              Subject: RE: Fw: [Behavioral-Finance] Recession


              Q "What trades are you talking about???"
              A Trades in your theory of non-overlapping "disperse
              information" as I explained.

              Your personalistic evaluations are - again - wrong.

              I'm not a trader, as I thoroughly explained before,
              even if I have knowledge about trading. We are known
              for our predictive modeling work in capital markets.
              What you confuse is my intolerance for conjecture
              that is not supported. I have sent you some of our
              work, and as yet, have not received any comment -
              meaningful or otherwise. Where's your work, as I
              would be more than pleased to critique it.

              Are you even incapable of critiquing ideas that are
              contrary to your own? Are you only interested in
              determining whether some is worthy of your self-
              worshipping brotherhood or not?

              You should avoid trying to assert math is not a
              science, which certainly is not why math is why
              the Nobel Foundation doesn't do math. If you
              would like, we could submit your theory to them
              for comment, as I'm sure they would be even more
              anxious for the opportunity to correct your, and
              perhaps others, misapprehension in this regard.

              We are in constant contact with many academics,
              so that is not a problem bridge to cross for us.
              The only thing that is bugging me in this issue
              is your non-responses to the issues at hand.

              Please try harder to discuss the issues, at least
              so that I don't feel so compelled to respond to
              your wrongheaded, if not meanspirited personalistic
              comments.

              Sincerely,

              Bob Bronson
              Bronson Capital Markets Research


              -----Original Message-----
              From: Peter R. Locke [mailto:plocke@...]
              Sent: Saturday, December 01, 2001 7:47 AM
              To: Behavioral-Finance@yahoogroups.com
              Subject: RE: Fw: [Behavioral-Finance] Recession


              What trades are you talking about??? You are clearly mistaking your trading
              world for the problems faced by social scientists of modeling. Modeling
              involves forming a system of assumptions, leading to logical conclusions
              which may then be tested. This in order to escape the problem of
              parochialism to which we are all burdened, being biased by our surroundings,
              current events, etc.
              It is this disconnect between the practitioner and scientist that seems to
              really bug you. The scientist is trying to look at the bigger picture, at
              least I think so. I get the feeling that you have no role for science, and
              would just as soon see it disappear. This, I believe, ignores the manifold
              contributions of science.

              The logic of science is that cases do not prove a point. Science is the art
              of testing theories and disproving. No one proves anything except in
              mathematics, which is why there is no nobel prize in math, it is not a
              science. We don't prove the world is round, we prove it is not flat.
              Absolute statements imply some meta-scientific knowledge, such as a belief
              in creationsism, rather than a scientific examination. The fact that
              someone makes money trading, for example, does not prove that markets are
              inefficient. This seems to be a big problem for traders, who feel that when
              they make money it proves market inefficiency. But we've gone around on
              this one before.

              By the way, while I have not been on a trading desk, in my work in
              litigation I have been in contact, helped depose, and otherwise dealt with
              many traders, back office folks, exchange officials, regulators, etc. This
              I consider an invaluable source of information, of which I'm sure you'ld
              agree.


              -----Original Message-----
              From: Bob Bronson [mailto:bob@...]
              Sent: Friday, November 30, 2001 8:06 PM
              To: Behavioral-Finance@yahoogroups.com
              Subject: RE: Fw: [Behavioral-Finance] Recession


              The bias that I pointed out is the result of the provable
              fact that virtually all trades are based upon at least
              some common information, especially with emphasis placed
              upon recent price cycle-trend. Have you ever worked at
              a trading desk, or on exchange floor?

              A theory of non-overlapping "disperse information" maybe
              an interesting academic polemic, but it doesn't reflect
              what traders and investors think and do.

              Upon further consideration, I would even argue it is both
              necessary and sufficient for fully discounted information
              to lead to both the self-fulfilling and self-defeating
              aspect of cycle-trends.

              In any case, time series correlations of prices and
              various quantified sentiment measures prove "herding"
              always leads to reversion-to-the-extreme in cycle-trends.
              This becomes obvious when one works with these things on
              a multi-time-horizon basis: hourly, daily, weekly, monthly,
              quarter, yearly and even longer like BAAC Supercycles.

              Don't you agree that supported, or supportable, absolute
              statements are more useful than unsupported conjectures?

              Even if one attempts to prove the aggregate of all players
              is a zero-sum game, don't you agree that such a proof will
              will have little bearing on the stronger condition that it
              is a zero-sum game for each agent individually? Of course,
              if the stronger condition could be proved, then the weaker
              one would be true, but that approach is fruitless since
              thousands if not millions walk away ahead of the game.


              -----Original Message-----
              From: Peter R. Locke [mailto:plocke@...]
              Sent: Friday, November 30, 2001 10:46 AM
              To: Behavioral-Finance@yahoogroups.com
              Subject: RE: Fw: [Behavioral-Finance] Recession


              I did not introduce bias in my framework....I was discussing a disperse
              information idea, rather than common information, and trading being
              necessary to reveal the idiosyncratic information, and if so it may be worth
              mimmicking, depending on how noisy the information signals are. Imagine a
              situation where two travelers from southern illinois take different paths to
              get to chicago, passing by farm after farm of soybean and corn. When they
              arrive, they each have some independent information about the crops. They
              trade futures, and their trading reveals to other traders, in a noisy way,
              obviously, what they have seen. I think this is kind of like the
              Grossman-Stiglitz model. If trading does not cause prices to fully adjust,
              then it may be (may be may be may be) under certain conditions, rational for
              some other bystanders to also trade, until the information is fully
              revealed. It is not necessary that there be overreaction due to the
              herding, though that is one outcome in some situations.

              But thats just the naive academic emerging again, trying to temper these
              absolute statements that eminate from the professionals...Perhaps there is
              no information in the real world, just traders chasing each other's tails,
              for no real purpose whatsoever, simply a big zero sum game. \

              -----Original Message-----
              From: Bob Bronson [mailto:bob@...]
              Sent: Friday, November 30, 2001 12:28 PM
              To: Behavioral-Finance@yahoogroups.com
              Subject: RE: Fw: [Behavioral-Finance] Recession


              No, Peter, multiple trades makes it trend-following
              since each trade has a similar bias, which is both
              immediately self-fulfilling, causing the trend, and
              eventually its exhaustion becomes self-defeating.

              Bob Bronson
              Bronson Capital Markets Research



              -----Original Message-----
              From: Peter R. Locke [mailto:plocke@...]
              Sent: Friday, November 30, 2001 8:46 AM
              To: Behavioral-Finance@yahoogroups.com
              Subject: RE: Fw: [Behavioral-Finance] Recession


              Herding may be rational...it works for the gazelle and the zebra. Relates
              to an efficient signal extraction and asymmetric information framework. If
              you know something and I know something, and I think your know something,
              and you think I know something, and we reveal this knowledge by trading, it
              might behoove us (herd pun intended) to follow each other. Note it is
              trade, not trend, following.

              -----Original Message-----
              From: Bob Bronson [mailto:bob@...]
              Sent: Friday, November 30, 2001 10:33 AM
              To: Behavioral-Finance@yahoogroups.com
              Subject: RE: Fw: [Behavioral-Finance] Recession


              Don't confuse "current" relative sales and earnings
              growth superiority with "future" stock prices. Such
              fully-recognized fundamentals cause overvaluation and
              some of these are the best short sales candidates -
              right now!

              The BF application here is trend-following or "herding"
              as everybody knows these current fundamentals and as a
              result, they are already fully invested in these areas
              and therefore these stocks are over owned "today".

              Our research suggests this bearish sector view will become
              very clear over the next several months, and quarters.

              Bob Bronson
              Bronson Capital Markets Research


              -----Original Message-----
              From: leif_ericssen@... [mailto:leif_ericssen@...]
              Sent: Thursday, November 29, 2001 3:57 PM
              To: Behavioral-Finance@yahoogroups.com
              Subject: Re: Fw: [Behavioral-Finance] Recession


              (Speaking from the US) consumer staples and health care are not
              highly affected by a recession, but investors know that.

              Some banking and other financial services can still be profitable,
              too, and that may not be fully discounted by markets.

              At this point, some transportation stocks may be worthwhile, since
              transportation firms will be early in the economic recovery and they
              have adapted to disruption in other places with things like war and
              terrorism.

              For any cyclical or seasonal consumer goods, I would look for firms
              with above average sales/inventory (or with a sales/inventory
              declining less than average)

              I don't know if that is what you mean by a BF way of approaching
              investing? Personally, I haven't gone into "top-down" industry
              analysis in investing before, these are just ideas I offered. Right
              now, I'm probably looking most at smaller growth firms in stock
              selection FWIW.

              Regards,
              Jan

              --- In Behavioral-Finance@y..., "HPB" <bobbymilk1@h...> wrote:
              > Hello everybody,
              >
              > Nobody from the list answered me when I posted the following
              message. Maybe my wondering wasn't interesting but it is getting more
              and more accurate, isn't it ?
              >
              > ps: I don't need the answer any more, it is just for fun. Thanks
              for your "theories sharing" anyway.
              >
              > ----- Original Message -----
              > From: Bobby Milk
              > To: Behavioral-Finance@y...
              > Sent: Thursday, April 05, 2001 7:15 AM
              > Subject: Fw: [Behavioral-Finance] Recession
              >
              >
              >
              >
              > Hi everybody,
              >
              > I am looking for a piece of information and I am convinced that
              some of the "top notch" people from this list will be able to help me.
              >
              > Mispricing means to exploit an anomaly regarding the traditional
              EMH approach that is economically valuable (including transaction
              costs and risk aversion).
              > If we assume a recession, exploiting this fact by investing in
              firms which business isn't correlated with GNP (or negatively
              correlated, if any) or investing in any firms (that I would like to
              identify) able to "outperform" in such an economic environment, can
              it be approached in a Behavioral Finance way ???
              >
              >
              > Thanks for your help, and thanks for your everyday "knowledge and
              ideas sharing"...
              >
              > P.S.: Excuse my French !!!
              >
              > HPB.
              >
              >
              >
              >
              > ---
              > Outgoing mail is certified Virus Free.
              > Checked by AVG anti-virus system (http://www.grisoft.com).
              > Version: 6.0.295 / Virus Database: 159 - Release Date: 01/11/2001



              you may unsubscribe by sending an email to

              Behavioral-Finance-unsubscribe@yahoogroups.com


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            • Peter R. Locke
              Thanks...somebody gets it, I guess. Great post Peter. I do agree with most of what you wrote about science. Actually, i think of behavioural finance as the
              Message 6 of 28 , Dec 1, 2001
              View Source
              • 0 Attachment
                Thanks...somebody gets it, I guess.


                Great post Peter.
                I do agree with most of what you wrote about science.
                Actually, i think of behavioural finance as the
                science (or the art) of reading the human collective
                mind, as an interpretative process of the decisions of
                the agents and the price (or value) changes emerging
                from them. As one is an economic agent, the most
                difficult part of the analysis is the following
                question : Is my filter to reality the same of the
                "market" ? So that one can build logical hypotesis and
                test them, with the underlying goal that is make
                money.

                --- "Peter R. Locke" <plocke@...>
                > What trades are you talking about??? You are
                > clearly mistaking your trading
                > world for the problems faced by social scientists of
                > modeling. Modeling
                > involves forming a system of assumptions, leading to
                > logical conclusions
                > which may then be tested. This in order to escape
                > the problem of
                > parochialism to which we are all burdened, being
                > biased by our surroundings,
                > current events, etc.
                > It is this disconnect between the practitioner and
                > scientist that seems to
                > really bug you. The scientist is trying to look at
                > the bigger picture, at
                > least I think so. I get the feeling that you have
                > no role for science, and
                > would just as soon see it disappear. This, I
                > believe, ignores the manifold
                > contributions of science.
                >
                > The logic of science is that cases do not prove a
                > point. Science is the art
                > of testing theories and disproving. No one proves
                > anything except in
                > mathematics, which is why there is no nobel prize in
                > math, it is not a
                > science. We don't prove the world is round, we
                > prove it is not flat.
                > Absolute statements imply some meta-scientific
                > knowledge, such as a belief
                > in creationsism, rather than a scientific
                > examination. The fact that
                > someone makes money trading, for example, does not
                > prove that markets are
                > inefficient. This seems to be a big problem for
                > traders, who feel that when
                > they make money it proves market inefficiency. But
                > we've gone around on
                > this one before.
                >
                > By the way, while I have not been on a trading desk,
                > in my work in
                > litigation I have been in contact, helped depose,
                > and otherwise dealt with
                > many traders, back office folks, exchange officials,
                > regulators, etc. This
                > I consider an invaluable source of information, of
                > which I'm sure you'ld
                > agree.
                >
                >
                > -----Original Message-----
                > From: Bob Bronson [mailto:bob@...]
                > Sent: Friday, November 30, 2001 8:06 PM
                > To: Behavioral-Finance@yahoogroups.com
                > Subject: RE: Fw: [Behavioral-Finance] Recession
                >
                >
                > The bias that I pointed out is the result of the
                > provable
                > fact that virtually all trades are based upon at
                > least
                > some common information, especially with emphasis
                > placed
                > upon recent price cycle-trend. Have you ever worked
                > at
                > a trading desk, or on exchange floor?
                >
                > A theory of non-overlapping "disperse information"
                > maybe
                > an interesting academic polemic, but it doesn't
                > reflect
                > what traders and investors think and do.
                >
                > Upon further consideration, I would even argue it is
                > both
                > necessary and sufficient for fully discounted
                > information
                > to lead to both the self-fulfilling and
                > self-defeating
                > aspect of cycle-trends.
                >
                > In any case, time series correlations of prices and
                > various quantified sentiment measures prove
                > "herding"
                > always leads to reversion-to-the-extreme in
                > cycle-trends.
                > This becomes obvious when one works with these
                > things on
                > a multi-time-horizon basis: hourly, daily, weekly,
                > monthly,
                > quarter, yearly and even longer like BAAC
                > Supercycles.
                >
                > Don't you agree that supported, or supportable,
                > absolute
                > statements are more useful than unsupported
                > conjectures?
                >
                > Even if one attempts to prove the aggregate of all
                > players
                > is a zero-sum game, don't you agree that such a
                > proof will
                > will have little bearing on the stronger condition
                > that it
                > is a zero-sum game for each agent individually? Of
                > course,
                > if the stronger condition could be proved, then the
                > weaker
                > one would be true, but that approach is fruitless
                > since
                > thousands if not millions walk away ahead of the
                > game.
                >
                >
                > -----Original Message-----
                > From: Peter R. Locke [mailto:plocke@...]
                > Sent: Friday, November 30, 2001 10:46 AM
                > To: Behavioral-Finance@yahoogroups.com
                > Subject: RE: Fw: [Behavioral-Finance] Recession
                >
                >
                > I did not introduce bias in my framework....I was
                > discussing a disperse
                > information idea, rather than common information,
                > and trading being
                > necessary to reveal the idiosyncratic information,
                > and if so it may be worth
                > mimmicking, depending on how noisy the information
                > signals are. Imagine a
                > situation where two travelers from southern illinois
                > take different paths to
                > get to chicago, passing by farm after farm of
                > soybean and corn. When they
                > arrive, they each have some independent information
                > about the crops. They
                > trade futures, and their trading reveals to other
                > traders, in a noisy way,
                > obviously, what they have seen. I think this is
                > kind of like the
                > Grossman-Stiglitz model. If trading does not cause
                > prices to fully adjust,
                > then it may be (may be may be may be) under certain
                > conditions, rational for
                > some other bystanders to also trade, until the
                > information is fully
                > revealed. It is not necessary that there be
                > overreaction due to the
                > herding, though that is one outcome in some
                > situations.
                >
                > But thats just the naive academic emerging again,
                > trying to temper these
                > absolute statements that eminate from the
                > professionals...Perhaps there is
                > no information in the real world, just traders
                > chasing each other's tails,
                > for no real purpose whatsoever, simply a big zero
                > sum game. \
                >
                > -----Original Message-----
                > From: Bob Bronson [mailto:bob@...]
                > Sent: Friday, November 30, 2001 12:28 PM
                > To: Behavioral-Finance@yahoogroups.com
                > Subject: RE: Fw: [Behavioral-Finance] Recession
                >
                >
                > No, Peter, multiple trades makes it trend-following
                > since each trade has a similar bias, which is both
                > immediately self-fulfilling, causing the trend, and
                > eventually its exhaustion becomes self-defeating.
                >
                > Bob Bronson
                > Bronson Capital Markets Research
                >
                >
                >
                > -----Original Message-----
                > From: Peter R. Locke [mailto:plocke@...]
                > Sent: Friday, November 30, 2001 8:46 AM
                > To: Behavioral-Finance@yahoogroups.com
                > Subject: RE: Fw: [Behavioral-Finance] Recession
                >
                >
                > Herding may be rational...it works for the gazelle
                > and the zebra. Relates
                > to an efficient signal extraction and asymmetric
                > information framework. If
                > you know something and I know something, and I think
                > your know something,
                > and you think I know something, and we reveal this
                > knowledge by trading, it
                > might behoove us (herd pun intended) to follow each
                > other. Note it is
                > trade, not trend, following.
                >
                > -----Original Message-----
                > From: Bob Bronson [mailto:bob@...]
                > Sent: Friday, November 30, 2001 10:33 AM
                > To: Behavioral-Finance@yahoogroups.com
                >
                === message truncated ===

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              • Bob Bronson
                Is this the best that you can do, or are you working on an answer? ... From: Peter R. Locke [mailto:plocke@gwu.edu] Sent: Saturday, December 01, 2001 12:31 PM
                Message 7 of 28 , Dec 1, 2001
                View Source
                • 0 Attachment
                  Is this the best that you can do,
                  or are you working on an answer?

                  -----Original Message-----
                  From: Peter R. Locke [mailto:plocke@...]
                  Sent: Saturday, December 01, 2001 12:31 PM
                  To: Behavioral-Finance@yahoogroups.com
                  Subject: RE: Fw: [Behavioral-Finance] Recession


                  ????????????????????????????????

                  -----Original Message-----
                  From: Bob Bronson [mailto:bob@...]
                  Sent: Saturday, December 01, 2001 2:21 PM
                  To: Behavioral-Finance@yahoogroups.com
                  Subject: RE: Fw: [Behavioral-Finance] Recession


                  Q "What trades are you talking about???"
                  A Trades in your theory of non-overlapping "disperse
                  information" as I explained.

                  Your personalistic evaluations are - again - wrong.

                  I'm not a trader, as I thoroughly explained before,
                  even if I have knowledge about trading. We are known
                  for our predictive modeling work in capital markets.
                  What you confuse is my intolerance for conjecture
                  that is not supported. I have sent you some of our
                  work, and as yet, have not received any comment -
                  meaningful or otherwise. Where's your work, as I
                  would be more than pleased to critique it.

                  Are you even incapable of critiquing ideas that are
                  contrary to your own? Are you only interested in
                  determining whether some is worthy of your self-
                  worshipping brotherhood or not?

                  You should avoid trying to assert math is not a
                  science, which certainly is not why math is why
                  the Nobel Foundation doesn't do math. If you
                  would like, we could submit your theory to them
                  for comment, as I'm sure they would be even more
                  anxious for the opportunity to correct your, and
                  perhaps others, misapprehension in this regard.

                  We are in constant contact with many academics,
                  so that is not a problem bridge to cross for us.
                  The only thing that is bugging me in this issue
                  is your non-responses to the issues at hand.

                  Please try harder to discuss the issues, at least
                  so that I don't feel so compelled to respond to
                  your wrongheaded, if not meanspirited personalistic
                  comments.

                  Sincerely,

                  Bob Bronson
                  Bronson Capital Markets Research


                  -----Original Message-----
                  From: Peter R. Locke [mailto:plocke@...]
                  Sent: Saturday, December 01, 2001 7:47 AM
                  To: Behavioral-Finance@yahoogroups.com
                  Subject: RE: Fw: [Behavioral-Finance] Recession


                  What trades are you talking about??? You are clearly mistaking your trading
                  world for the problems faced by social scientists of modeling. Modeling
                  involves forming a system of assumptions, leading to logical conclusions
                  which may then be tested. This in order to escape the problem of
                  parochialism to which we are all burdened, being biased by our surroundings,
                  current events, etc.
                  It is this disconnect between the practitioner and scientist that seems to
                  really bug you. The scientist is trying to look at the bigger picture, at
                  least I think so. I get the feeling that you have no role for science, and
                  would just as soon see it disappear. This, I believe, ignores the manifold
                  contributions of science.

                  The logic of science is that cases do not prove a point. Science is the art
                  of testing theories and disproving. No one proves anything except in
                  mathematics, which is why there is no nobel prize in math, it is not a
                  science. We don't prove the world is round, we prove it is not flat.
                  Absolute statements imply some meta-scientific knowledge, such as a belief
                  in creationsism, rather than a scientific examination. The fact that
                  someone makes money trading, for example, does not prove that markets are
                  inefficient. This seems to be a big problem for traders, who feel that when
                  they make money it proves market inefficiency. But we've gone around on
                  this one before.

                  By the way, while I have not been on a trading desk, in my work in
                  litigation I have been in contact, helped depose, and otherwise dealt with
                  many traders, back office folks, exchange officials, regulators, etc. This
                  I consider an invaluable source of information, of which I'm sure you'ld
                  agree.


                  -----Original Message-----
                  From: Bob Bronson [mailto:bob@...]
                  Sent: Friday, November 30, 2001 8:06 PM
                  To: Behavioral-Finance@yahoogroups.com
                  Subject: RE: Fw: [Behavioral-Finance] Recession


                  The bias that I pointed out is the result of the provable
                  fact that virtually all trades are based upon at least
                  some common information, especially with emphasis placed
                  upon recent price cycle-trend. Have you ever worked at
                  a trading desk, or on exchange floor?

                  A theory of non-overlapping "disperse information" maybe
                  an interesting academic polemic, but it doesn't reflect
                  what traders and investors think and do.

                  Upon further consideration, I would even argue it is both
                  necessary and sufficient for fully discounted information
                  to lead to both the self-fulfilling and self-defeating
                  aspect of cycle-trends.

                  In any case, time series correlations of prices and
                  various quantified sentiment measures prove "herding"
                  always leads to reversion-to-the-extreme in cycle-trends.
                  This becomes obvious when one works with these things on
                  a multi-time-horizon basis: hourly, daily, weekly, monthly,
                  quarter, yearly and even longer like BAAC Supercycles.

                  Don't you agree that supported, or supportable, absolute
                  statements are more useful than unsupported conjectures?

                  Even if one attempts to prove the aggregate of all players
                  is a zero-sum game, don't you agree that such a proof will
                  will have little bearing on the stronger condition that it
                  is a zero-sum game for each agent individually? Of course,
                  if the stronger condition could be proved, then the weaker
                  one would be true, but that approach is fruitless since
                  thousands if not millions walk away ahead of the game.


                  -----Original Message-----
                  From: Peter R. Locke [mailto:plocke@...]
                  Sent: Friday, November 30, 2001 10:46 AM
                  To: Behavioral-Finance@yahoogroups.com
                  Subject: RE: Fw: [Behavioral-Finance] Recession


                  I did not introduce bias in my framework....I was discussing a disperse
                  information idea, rather than common information, and trading being
                  necessary to reveal the idiosyncratic information, and if so it may be worth
                  mimmicking, depending on how noisy the information signals are. Imagine a
                  situation where two travelers from southern illinois take different paths to
                  get to chicago, passing by farm after farm of soybean and corn. When they
                  arrive, they each have some independent information about the crops. They
                  trade futures, and their trading reveals to other traders, in a noisy way,
                  obviously, what they have seen. I think this is kind of like the
                  Grossman-Stiglitz model. If trading does not cause prices to fully adjust,
                  then it may be (may be may be may be) under certain conditions, rational for
                  some other bystanders to also trade, until the information is fully
                  revealed. It is not necessary that there be overreaction due to the
                  herding, though that is one outcome in some situations.

                  But thats just the naive academic emerging again, trying to temper these
                  absolute statements that eminate from the professionals...Perhaps there is
                  no information in the real world, just traders chasing each other's tails,
                  for no real purpose whatsoever, simply a big zero sum game. \

                  -----Original Message-----
                  From: Bob Bronson [mailto:bob@...]
                  Sent: Friday, November 30, 2001 12:28 PM
                  To: Behavioral-Finance@yahoogroups.com
                  Subject: RE: Fw: [Behavioral-Finance] Recession


                  No, Peter, multiple trades makes it trend-following
                  since each trade has a similar bias, which is both
                  immediately self-fulfilling, causing the trend, and
                  eventually its exhaustion becomes self-defeating.

                  Bob Bronson
                  Bronson Capital Markets Research



                  -----Original Message-----
                  From: Peter R. Locke [mailto:plocke@...]
                  Sent: Friday, November 30, 2001 8:46 AM
                  To: Behavioral-Finance@yahoogroups.com
                  Subject: RE: Fw: [Behavioral-Finance] Recession


                  Herding may be rational...it works for the gazelle and the zebra. Relates
                  to an efficient signal extraction and asymmetric information framework. If
                  you know something and I know something, and I think your know something,
                  and you think I know something, and we reveal this knowledge by trading, it
                  might behoove us (herd pun intended) to follow each other. Note it is
                  trade, not trend, following.

                  -----Original Message-----
                  From: Bob Bronson [mailto:bob@...]
                  Sent: Friday, November 30, 2001 10:33 AM
                  To: Behavioral-Finance@yahoogroups.com
                  Subject: RE: Fw: [Behavioral-Finance] Recession


                  Don't confuse "current" relative sales and earnings
                  growth superiority with "future" stock prices. Such
                  fully-recognized fundamentals cause overvaluation and
                  some of these are the best short sales candidates -
                  right now!

                  The BF application here is trend-following or "herding"
                  as everybody knows these current fundamentals and as a
                  result, they are already fully invested in these areas
                  and therefore these stocks are over owned "today".

                  Our research suggests this bearish sector view will become
                  very clear over the next several months, and quarters.

                  Bob Bronson
                  Bronson Capital Markets Research


                  -----Original Message-----
                  From: leif_ericssen@... [mailto:leif_ericssen@...]
                  Sent: Thursday, November 29, 2001 3:57 PM
                  To: Behavioral-Finance@yahoogroups.com
                  Subject: Re: Fw: [Behavioral-Finance] Recession


                  (Speaking from the US) consumer staples and health care are not
                  highly affected by a recession, but investors know that.

                  Some banking and other financial services can still be profitable,
                  too, and that may not be fully discounted by markets.

                  At this point, some transportation stocks may be worthwhile, since
                  transportation firms will be early in the economic recovery and they
                  have adapted to disruption in other places with things like war and
                  terrorism.

                  For any cyclical or seasonal consumer goods, I would look for firms
                  with above average sales/inventory (or with a sales/inventory
                  declining less than average)

                  I don't know if that is what you mean by a BF way of approaching
                  investing? Personally, I haven't gone into "top-down" industry
                  analysis in investing before, these are just ideas I offered. Right
                  now, I'm probably looking most at smaller growth firms in stock
                  selection FWIW.

                  Regards,
                  Jan

                  --- In Behavioral-Finance@y..., "HPB" <bobbymilk1@h...> wrote:
                  > Hello everybody,
                  >
                  > Nobody from the list answered me when I posted the following
                  message. Maybe my wondering wasn't interesting but it is getting more
                  and more accurate, isn't it ?
                  >
                  > ps: I don't need the answer any more, it is just for fun. Thanks
                  for your "theories sharing" anyway.
                  >
                  > ----- Original Message -----
                  > From: Bobby Milk
                  > To: Behavioral-Finance@y...
                  > Sent: Thursday, April 05, 2001 7:15 AM
                  > Subject: Fw: [Behavioral-Finance] Recession
                  >
                  >
                  >
                  >
                  > Hi everybody,
                  >
                  > I am looking for a piece of information and I am convinced that
                  some of the "top notch" people from this list will be able to help me.
                  >
                  > Mispricing means to exploit an anomaly regarding the traditional
                  EMH approach that is economically valuable (including transaction
                  costs and risk aversion).
                  > If we assume a recession, exploiting this fact by investing in
                  firms which business isn't correlated with GNP (or negatively
                  correlated, if any) or investing in any firms (that I would like to
                  identify) able to "outperform" in such an economic environment, can
                  it be approached in a Behavioral Finance way ???
                  >
                  >
                  > Thanks for your help, and thanks for your everyday "knowledge and
                  ideas sharing"...
                  >
                  > P.S.: Excuse my French !!!
                  >
                  > HPB.
                  >
                  >
                  >
                  >
                  > ---
                  > Outgoing mail is certified Virus Free.
                  > Checked by AVG anti-virus system (http://www.grisoft.com).
                  > Version: 6.0.295 / Virus Database: 159 - Release Date: 01/11/2001



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                • Peter R. Locke
                  I didnt see a question, just preaching. I think I ve had it. Sorry. Just a failure to communicate. I ve had 1 or 2 students with the same sorts of issues
                  Message 8 of 28 , Dec 1, 2001
                  View Source
                  • 0 Attachment
                    I didnt see a question, just preaching. I think I've had it. Sorry. Just
                    a failure to communicate. I've had 1 or 2 students with the same sorts of
                    issues in the past. No potential for research. For sure it takes a
                    different mindset, and it seems to really irritate you to have a scientific
                    dialogue.

                    -----Original Message-----
                    From: Bob Bronson [mailto:bob@...]
                    Sent: Saturday, December 01, 2001 2:47 PM
                    To: Behavioral-Finance@yahoogroups.com
                    Subject: RE: Fw: [Behavioral-Finance] Recession


                    Is this the best that you can do,
                    or are you working on an answer?

                    -----Original Message-----
                    From: Peter R. Locke [mailto:plocke@...]
                    Sent: Saturday, December 01, 2001 12:31 PM
                    To: Behavioral-Finance@yahoogroups.com
                    Subject: RE: Fw: [Behavioral-Finance] Recession


                    ????????????????????????????????

                    -----Original Message-----
                    From: Bob Bronson [mailto:bob@...]
                    Sent: Saturday, December 01, 2001 2:21 PM
                    To: Behavioral-Finance@yahoogroups.com
                    Subject: RE: Fw: [Behavioral-Finance] Recession


                    Q "What trades are you talking about???"
                    A Trades in your theory of non-overlapping "disperse
                    information" as I explained.

                    Your personalistic evaluations are - again - wrong.

                    I'm not a trader, as I thoroughly explained before,
                    even if I have knowledge about trading. We are known
                    for our predictive modeling work in capital markets.
                    What you confuse is my intolerance for conjecture
                    that is not supported. I have sent you some of our
                    work, and as yet, have not received any comment -
                    meaningful or otherwise. Where's your work, as I
                    would be more than pleased to critique it.

                    Are you even incapable of critiquing ideas that are
                    contrary to your own? Are you only interested in
                    determining whether some is worthy of your self-
                    worshipping brotherhood or not?

                    You should avoid trying to assert math is not a
                    science, which certainly is not why math is why
                    the Nobel Foundation doesn't do math. If you
                    would like, we could submit your theory to them
                    for comment, as I'm sure they would be even more
                    anxious for the opportunity to correct your, and
                    perhaps others, misapprehension in this regard.

                    We are in constant contact with many academics,
                    so that is not a problem bridge to cross for us.
                    The only thing that is bugging me in this issue
                    is your non-responses to the issues at hand.

                    Please try harder to discuss the issues, at least
                    so that I don't feel so compelled to respond to
                    your wrongheaded, if not meanspirited personalistic
                    comments.

                    Sincerely,

                    Bob Bronson
                    Bronson Capital Markets Research


                    -----Original Message-----
                    From: Peter R. Locke [mailto:plocke@...]
                    Sent: Saturday, December 01, 2001 7:47 AM
                    To: Behavioral-Finance@yahoogroups.com
                    Subject: RE: Fw: [Behavioral-Finance] Recession


                    What trades are you talking about??? You are clearly mistaking your trading
                    world for the problems faced by social scientists of modeling. Modeling
                    involves forming a system of assumptions, leading to logical conclusions
                    which may then be tested. This in order to escape the problem of
                    parochialism to which we are all burdened, being biased by our surroundings,
                    current events, etc.
                    It is this disconnect between the practitioner and scientist that seems to
                    really bug you. The scientist is trying to look at the bigger picture, at
                    least I think so. I get the feeling that you have no role for science, and
                    would just as soon see it disappear. This, I believe, ignores the manifold
                    contributions of science.

                    The logic of science is that cases do not prove a point. Science is the art
                    of testing theories and disproving. No one proves anything except in
                    mathematics, which is why there is no nobel prize in math, it is not a
                    science. We don't prove the world is round, we prove it is not flat.
                    Absolute statements imply some meta-scientific knowledge, such as a belief
                    in creationsism, rather than a scientific examination. The fact that
                    someone makes money trading, for example, does not prove that markets are
                    inefficient. This seems to be a big problem for traders, who feel that when
                    they make money it proves market inefficiency. But we've gone around on
                    this one before.

                    By the way, while I have not been on a trading desk, in my work in
                    litigation I have been in contact, helped depose, and otherwise dealt with
                    many traders, back office folks, exchange officials, regulators, etc. This
                    I consider an invaluable source of information, of which I'm sure you'ld
                    agree.


                    -----Original Message-----
                    From: Bob Bronson [mailto:bob@...]
                    Sent: Friday, November 30, 2001 8:06 PM
                    To: Behavioral-Finance@yahoogroups.com
                    Subject: RE: Fw: [Behavioral-Finance] Recession


                    The bias that I pointed out is the result of the provable
                    fact that virtually all trades are based upon at least
                    some common information, especially with emphasis placed
                    upon recent price cycle-trend. Have you ever worked at
                    a trading desk, or on exchange floor?

                    A theory of non-overlapping "disperse information" maybe
                    an interesting academic polemic, but it doesn't reflect
                    what traders and investors think and do.

                    Upon further consideration, I would even argue it is both
                    necessary and sufficient for fully discounted information
                    to lead to both the self-fulfilling and self-defeating
                    aspect of cycle-trends.

                    In any case, time series correlations of prices and
                    various quantified sentiment measures prove "herding"
                    always leads to reversion-to-the-extreme in cycle-trends.
                    This becomes obvious when one works with these things on
                    a multi-time-horizon basis: hourly, daily, weekly, monthly,
                    quarter, yearly and even longer like BAAC Supercycles.

                    Don't you agree that supported, or supportable, absolute
                    statements are more useful than unsupported conjectures?

                    Even if one attempts to prove the aggregate of all players
                    is a zero-sum game, don't you agree that such a proof will
                    will have little bearing on the stronger condition that it
                    is a zero-sum game for each agent individually? Of course,
                    if the stronger condition could be proved, then the weaker
                    one would be true, but that approach is fruitless since
                    thousands if not millions walk away ahead of the game.


                    -----Original Message-----
                    From: Peter R. Locke [mailto:plocke@...]
                    Sent: Friday, November 30, 2001 10:46 AM
                    To: Behavioral-Finance@yahoogroups.com
                    Subject: RE: Fw: [Behavioral-Finance] Recession


                    I did not introduce bias in my framework....I was discussing a disperse
                    information idea, rather than common information, and trading being
                    necessary to reveal the idiosyncratic information, and if so it may be worth
                    mimmicking, depending on how noisy the information signals are. Imagine a
                    situation where two travelers from southern illinois take different paths to
                    get to chicago, passing by farm after farm of soybean and corn. When they
                    arrive, they each have some independent information about the crops. They
                    trade futures, and their trading reveals to other traders, in a noisy way,
                    obviously, what they have seen. I think this is kind of like the
                    Grossman-Stiglitz model. If trading does not cause prices to fully adjust,
                    then it may be (may be may be may be) under certain conditions, rational for
                    some other bystanders to also trade, until the information is fully
                    revealed. It is not necessary that there be overreaction due to the
                    herding, though that is one outcome in some situations.

                    But thats just the naive academic emerging again, trying to temper these
                    absolute statements that eminate from the professionals...Perhaps there is
                    no information in the real world, just traders chasing each other's tails,
                    for no real purpose whatsoever, simply a big zero sum game. \

                    -----Original Message-----
                    From: Bob Bronson [mailto:bob@...]
                    Sent: Friday, November 30, 2001 12:28 PM
                    To: Behavioral-Finance@yahoogroups.com
                    Subject: RE: Fw: [Behavioral-Finance] Recession


                    No, Peter, multiple trades makes it trend-following
                    since each trade has a similar bias, which is both
                    immediately self-fulfilling, causing the trend, and
                    eventually its exhaustion becomes self-defeating.

                    Bob Bronson
                    Bronson Capital Markets Research



                    -----Original Message-----
                    From: Peter R. Locke [mailto:plocke@...]
                    Sent: Friday, November 30, 2001 8:46 AM
                    To: Behavioral-Finance@yahoogroups.com
                    Subject: RE: Fw: [Behavioral-Finance] Recession


                    Herding may be rational...it works for the gazelle and the zebra. Relates
                    to an efficient signal extraction and asymmetric information framework. If
                    you know something and I know something, and I think your know something,
                    and you think I know something, and we reveal this knowledge by trading, it
                    might behoove us (herd pun intended) to follow each other. Note it is
                    trade, not trend, following.

                    -----Original Message-----
                    From: Bob Bronson [mailto:bob@...]
                    Sent: Friday, November 30, 2001 10:33 AM
                    To: Behavioral-Finance@yahoogroups.com
                    Subject: RE: Fw: [Behavioral-Finance] Recession


                    Don't confuse "current" relative sales and earnings
                    growth superiority with "future" stock prices. Such
                    fully-recognized fundamentals cause overvaluation and
                    some of these are the best short sales candidates -
                    right now!

                    The BF application here is trend-following or "herding"
                    as everybody knows these current fundamentals and as a
                    result, they are already fully invested in these areas
                    and therefore these stocks are over owned "today".

                    Our research suggests this bearish sector view will become
                    very clear over the next several months, and quarters.

                    Bob Bronson
                    Bronson Capital Markets Research


                    -----Original Message-----
                    From: leif_ericssen@... [mailto:leif_ericssen@...]
                    Sent: Thursday, November 29, 2001 3:57 PM
                    To: Behavioral-Finance@yahoogroups.com
                    Subject: Re: Fw: [Behavioral-Finance] Recession


                    (Speaking from the US) consumer staples and health care are not
                    highly affected by a recession, but investors know that.

                    Some banking and other financial services can still be profitable,
                    too, and that may not be fully discounted by markets.

                    At this point, some transportation stocks may be worthwhile, since
                    transportation firms will be early in the economic recovery and they
                    have adapted to disruption in other places with things like war and
                    terrorism.

                    For any cyclical or seasonal consumer goods, I would look for firms
                    with above average sales/inventory (or with a sales/inventory
                    declining less than average)

                    I don't know if that is what you mean by a BF way of approaching
                    investing? Personally, I haven't gone into "top-down" industry
                    analysis in investing before, these are just ideas I offered. Right
                    now, I'm probably looking most at smaller growth firms in stock
                    selection FWIW.

                    Regards,
                    Jan

                    --- In Behavioral-Finance@y..., "HPB" <bobbymilk1@h...> wrote:
                    > Hello everybody,
                    >
                    > Nobody from the list answered me when I posted the following
                    message. Maybe my wondering wasn't interesting but it is getting more
                    and more accurate, isn't it ?
                    >
                    > ps: I don't need the answer any more, it is just for fun. Thanks
                    for your "theories sharing" anyway.
                    >
                    > ----- Original Message -----
                    > From: Bobby Milk
                    > To: Behavioral-Finance@y...
                    > Sent: Thursday, April 05, 2001 7:15 AM
                    > Subject: Fw: [Behavioral-Finance] Recession
                    >
                    >
                    >
                    >
                    > Hi everybody,
                    >
                    > I am looking for a piece of information and I am convinced that
                    some of the "top notch" people from this list will be able to help me.
                    >
                    > Mispricing means to exploit an anomaly regarding the traditional
                    EMH approach that is economically valuable (including transaction
                    costs and risk aversion).
                    > If we assume a recession, exploiting this fact by investing in
                    firms which business isn't correlated with GNP (or negatively
                    correlated, if any) or investing in any firms (that I would like to
                    identify) able to "outperform" in such an economic environment, can
                    it be approached in a Behavioral Finance way ???
                    >
                    >
                    > Thanks for your help, and thanks for your everyday "knowledge and
                    ideas sharing"...
                    >
                    > P.S.: Excuse my French !!!
                    >
                    > HPB.
                    >
                    >
                    >
                    >
                    > ---
                    > Outgoing mail is certified Virus Free.
                    > Checked by AVG anti-virus system (http://www.grisoft.com).
                    > Version: 6.0.295 / Virus Database: 159 - Release Date: 01/11/2001



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                  • Bob Bronson
                    Fun article, which raises the game theory question of what degree of reflection is necessary to beat the capital markets. We would suggest it is only the
                    Message 9 of 28 , Dec 1, 2001
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                      Fun article, which raises the game theory question of
                      what degree of reflection is necessary to "beat" the
                      capital markets.

                      We would suggest it is only the first level, that is, you
                      only need to know the distinction between what is, or is
                      going to be, compared to what the market mind thinks, or
                      more precisely, what the dollar-weighted opinion of
                      investors think.

                      Institutional investors, who constitute the vast majority
                      of trading that determines secondary market prices, have
                      more sophisticated analytical and subjective opinions
                      leading to their actions. However, as we all know, what
                      they know and expect does not always turn out to be correct,
                      especially at cyclical turning points. In fact, we believe
                      they "always" diverge at cycle-trend turning points, which
                      can be said I believe to be true by definition.

                      Hopefully this does not seem too dogmatic because this can
                      be empirically supported by evaluating the consensus view
                      with what actually eventually occurs. We have done this
                      often enough to know it is always true, and the supporting
                      theory is that the progressive sequence of trend-following
                      from more-to-less-sophisticated investor money eventually
                      runs out causing the net buyer-seller imbalance to shift,
                      or a cycle-trend reversal.

                      Unfortunately, it is not easy for the average investor to
                      "know" what institutional investors collectively think. But
                      it is not difficult, only time consuming, to track what
                      the market mind thinks or expects. It largely reflects
                      aggregate institutional views, at least as well as it is
                      reported by the financial media, which itself is not an
                      always-accurate process. Journalists are not investment
                      decision-making pros and they prefer to try to report both
                      sides of a story rather than the weighted aggregate view.

                      But even for institutional investors, second-guessing the
                      opinions/actions of a multitude of competitors isn't as
                      easy as with limited-decision games with few participants.
                      So no matter how well one learns to understand the decision-
                      making process of (dollar-weighted) investors, in general,
                      the reflectivity level of the capital markets is really
                      only one level deep. The complexity in beating the market(s)
                      lies in "knowing" what is true, and likely to be true, as
                      compared to the institutional investor's influence on the
                      market mind's conceptions.

                      For example, if you "know" the recession will be longer
                      and/or deeper than is being reported by the financial
                      press as the consensus view, then you should bet that
                      the correction to what we call the Policy-maker's 9/11
                      Intervention Rally since 9/21/01, will be sharper and/or
                      more prolonged than what the market mind expects.

                      Bob Bronson
                      Bronson Capital Markets Research



                      -----Original Message-----
                      From: pgreenfinch@... [mailto:pgreenfinch@...]
                      Sent: Friday, November 30, 2001 1:08 AM
                      To: Behavioral-Finance@yahoogroups.com
                      Subject: Re: Fw: [Behavioral-Finance] Recession


                      Thanks, HPB,
                      Yes, Orlean writes good things.
                      That leads to a question to the group:
                      Has any sociological study been made on
                      whether active stock players,
                      individually as well as a tribe, are more
                      of the conventional, or of the eccentric type,
                      than the general population is?

                      As concern autoreferential rationality /
                      rational anticipations, here is a well made
                      small article of Alexandre Delaigue:
                      http://perso.wanadoo.fr/pgreenfinch/eanticip.htm

                      PG

                      --- In Behavioral-Finance@y..., "HPB" <bobbymilk1@h...> wrote:
                      > Hello,
                      >
                      > That absolutely what I meant. I read a good book last year (French
                      one) from André Orléan that deals with the "convention" approach: it
                      is called "The power of the Finance". Basically speaking, it
                      describes sevral kinds of rationnality and one is very interesting.
                      The author calls it the "autoreferential" rationnality and it can be
                      seen as one issued from the Games Theory: you don't deal with your
                      own believes about where the market is going but you try to guess how
                      the others people will react on the new information you expect to
                      occur but you also know that people know that you will use their
                      believes. Hope you understand what I mean: I know that if this
                      specific market indicator fall you will react like that. But I know
                      that you know that I know you will react...and so on.
                      > Sorry, no time to develop now. If you are interested I would
                      develop and precise later...
                      >
                      > Regards,
                      > HPB.
                      > ----- Original Message -----
                      > From: leif_ericssen@y...
                      > To: Behavioral-Finance@y...
                      > Sent: Thursday, November 29, 2001 11:57 PM
                      > Subject: Re: Fw: [Behavioral-Finance] Recession
                      >
                      >
                      > (Speaking from the US) consumer staples and health care are not
                      > highly affected by a recession, but investors know that.
                      >
                      > Some banking and other financial services can still be
                      profitable,
                      > too, and that may not be fully discounted by markets.
                      >
                      > At this point, some transportation stocks may be worthwhile,
                      since
                      > transportation firms will be early in the economic recovery and
                      they
                      > have adapted to disruption in other places with things like war
                      and
                      > terrorism.
                      >
                      > For any cyclical or seasonal consumer goods, I would look for
                      firms
                      > with above average sales/inventory (or with a sales/inventory
                      > declining less than average)
                      >
                      > I don't know if that is what you mean by a BF way of approaching
                      > investing? Personally, I haven't gone into "top-down" industry
                      > analysis in investing before, these are just ideas I offered.
                      Right
                      > now, I'm probably looking most at smaller growth firms in stock
                      > selection FWIW.
                      >
                      > Regards,
                      > Jan
                      >
                      > --- In Behavioral-Finance@y..., "HPB" <bobbymilk1@h...> wrote:
                      > > Hello everybody,
                      > >
                      > > Nobody from the list answered me when I posted the following
                      > message. Maybe my wondering wasn't interesting but it is getting
                      more
                      > and more accurate, isn't it ?
                      > >
                      > > ps: I don't need the answer any more, it is just for fun.
                      Thanks
                      > for your "theories sharing" anyway.
                      > >
                      > > ----- Original Message -----
                      > > From: Bobby Milk
                      > > To: Behavioral-Finance@y...
                      > > Sent: Thursday, April 05, 2001 7:15 AM
                      > > Subject: Fw: [Behavioral-Finance] Recession
                      > >
                      > >
                      > >
                      > >
                      > > Hi everybody,
                      > >
                      > > I am looking for a piece of information and I am convinced that
                      > some of the "top notch" people from this list will be able to
                      help me.
                      > >
                      > > Mispricing means to exploit an anomaly regarding the
                      traditional
                      > EMH approach that is economically valuable (including transaction
                      > costs and risk aversion).
                      > > If we assume a recession, exploiting this fact by investing in
                      > firms which business isn't correlated with GNP (or negatively
                      > correlated, if any) or investing in any firms (that I would like
                      to
                      > identify) able to "outperform" in such an economic environment,
                      can
                      > it be approached in a Behavioral Finance way ???
                      > >
                      > >
                      > > Thanks for your help, and thanks for your everyday "knowledge
                      and
                      > ideas sharing"...
                      > >
                      > > P.S.: Excuse my French !!!
                      > >
                      > > HPB.
                      > >
                      > >
                      > >
                      > >
                      > > ---
                      > > Outgoing mail is certified Virus Free.
                      > > Checked by AVG anti-virus system (http://www.grisoft.com).
                      > > Version: 6.0.295 / Virus Database: 159 - Release Date:
                      01/11/2001
                      >
                      >
                      > Yahoo! Groups Sponsor
                      > ADVERTISEMENT
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                    • Bob Bronson
                      Fine, Peter, but the problem is I am not your student, and you have a lot to learn yourself. My responses were defensive because you chose not to discuss the
                      Message 10 of 28 , Dec 1, 2001
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                        Fine, Peter, but the problem is I am not your
                        student, and you have a lot to learn yourself.

                        My responses were defensive because you chose
                        not to discuss the issue, but rather to be ad
                        hominem. There certainly is no Nobel Prize
                        for personalistic - that is not a science.

                        And, no, the difference is I enjoy the dialogue
                        and am really interested in your responses,
                        especially to the "research" papers I sent you.

                        Your choice.


                        -----Original Message-----
                        From: Peter R. Locke [mailto:plocke@...]
                        Sent: Saturday, December 01, 2001 12:59 PM
                        To: Behavioral-Finance@yahoogroups.com
                        Subject: RE: Fw: [Behavioral-Finance] Recession


                        I didnt see a question, just preaching. I think I've had it. Sorry. Just
                        a failure to communicate. I've had 1 or 2 students with the same sorts of
                        issues in the past. No potential for research. For sure it takes a
                        different mindset, and it seems to really irritate you to have a scientific
                        dialogue.

                        -----Original Message-----
                        From: Bob Bronson [mailto:bob@...]
                        Sent: Saturday, December 01, 2001 2:47 PM
                        To: Behavioral-Finance@yahoogroups.com
                        Subject: RE: Fw: [Behavioral-Finance] Recession


                        Is this the best that you can do,
                        or are you working on an answer?

                        -----Original Message-----
                        From: Peter R. Locke [mailto:plocke@...]
                        Sent: Saturday, December 01, 2001 12:31 PM
                        To: Behavioral-Finance@yahoogroups.com
                        Subject: RE: Fw: [Behavioral-Finance] Recession


                        ????????????????????????????????

                        -----Original Message-----
                        From: Bob Bronson [mailto:bob@...]
                        Sent: Saturday, December 01, 2001 2:21 PM
                        To: Behavioral-Finance@yahoogroups.com
                        Subject: RE: Fw: [Behavioral-Finance] Recession


                        Q "What trades are you talking about???"
                        A Trades in your theory of non-overlapping "disperse
                        information" as I explained.

                        Your personalistic evaluations are - again - wrong.

                        I'm not a trader, as I thoroughly explained before,
                        even if I have knowledge about trading. We are known
                        for our predictive modeling work in capital markets.
                        What you confuse is my intolerance for conjecture
                        that is not supported. I have sent you some of our
                        work, and as yet, have not received any comment -
                        meaningful or otherwise. Where's your work, as I
                        would be more than pleased to critique it.

                        Are you even incapable of critiquing ideas that are
                        contrary to your own? Are you only interested in
                        determining whether some is worthy of your self-
                        worshipping brotherhood or not?

                        You should avoid trying to assert math is not a
                        science, which certainly is not why math is why
                        the Nobel Foundation doesn't do math. If you
                        would like, we could submit your theory to them
                        for comment, as I'm sure they would be even more
                        anxious for the opportunity to correct your, and
                        perhaps others, misapprehension in this regard.

                        We are in constant contact with many academics,
                        so that is not a problem bridge to cross for us.
                        The only thing that is bugging me in this issue
                        is your non-responses to the issues at hand.

                        Please try harder to discuss the issues, at least
                        so that I don't feel so compelled to respond to
                        your wrongheaded, if not meanspirited personalistic
                        comments.

                        Sincerely,

                        Bob Bronson
                        Bronson Capital Markets Research


                        -----Original Message-----
                        From: Peter R. Locke [mailto:plocke@...]
                        Sent: Saturday, December 01, 2001 7:47 AM
                        To: Behavioral-Finance@yahoogroups.com
                        Subject: RE: Fw: [Behavioral-Finance] Recession


                        What trades are you talking about??? You are clearly mistaking your trading
                        world for the problems faced by social scientists of modeling. Modeling
                        involves forming a system of assumptions, leading to logical conclusions
                        which may then be tested. This in order to escape the problem of
                        parochialism to which we are all burdened, being biased by our surroundings,
                        current events, etc.
                        It is this disconnect between the practitioner and scientist that seems to
                        really bug you. The scientist is trying to look at the bigger picture, at
                        least I think so. I get the feeling that you have no role for science, and
                        would just as soon see it disappear. This, I believe, ignores the manifold
                        contributions of science.

                        The logic of science is that cases do not prove a point. Science is the art
                        of testing theories and disproving. No one proves anything except in
                        mathematics, which is why there is no nobel prize in math, it is not a
                        science. We don't prove the world is round, we prove it is not flat.
                        Absolute statements imply some meta-scientific knowledge, such as a belief
                        in creationsism, rather than a scientific examination. The fact that
                        someone makes money trading, for example, does not prove that markets are
                        inefficient. This seems to be a big problem for traders, who feel that when
                        they make money it proves market inefficiency. But we've gone around on
                        this one before.

                        By the way, while I have not been on a trading desk, in my work in
                        litigation I have been in contact, helped depose, and otherwise dealt with
                        many traders, back office folks, exchange officials, regulators, etc. This
                        I consider an invaluable source of information, of which I'm sure you'ld
                        agree.


                        -----Original Message-----
                        From: Bob Bronson [mailto:bob@...]
                        Sent: Friday, November 30, 2001 8:06 PM
                        To: Behavioral-Finance@yahoogroups.com
                        Subject: RE: Fw: [Behavioral-Finance] Recession


                        The bias that I pointed out is the result of the provable
                        fact that virtually all trades are based upon at least
                        some common information, especially with emphasis placed
                        upon recent price cycle-trend. Have you ever worked at
                        a trading desk, or on exchange floor?

                        A theory of non-overlapping "disperse information" maybe
                        an interesting academic polemic, but it doesn't reflect
                        what traders and investors think and do.

                        Upon further consideration, I would even argue it is both
                        necessary and sufficient for fully discounted information
                        to lead to both the self-fulfilling and self-defeating
                        aspect of cycle-trends.

                        In any case, time series correlations of prices and
                        various quantified sentiment measures prove "herding"
                        always leads to reversion-to-the-extreme in cycle-trends.
                        This becomes obvious when one works with these things on
                        a multi-time-horizon basis: hourly, daily, weekly, monthly,
                        quarter, yearly and even longer like BAAC Supercycles.

                        Don't you agree that supported, or supportable, absolute
                        statements are more useful than unsupported conjectures?

                        Even if one attempts to prove the aggregate of all players
                        is a zero-sum game, don't you agree that such a proof will
                        will have little bearing on the stronger condition that it
                        is a zero-sum game for each agent individually? Of course,
                        if the stronger condition could be proved, then the weaker
                        one would be true, but that approach is fruitless since
                        thousands if not millions walk away ahead of the game.


                        -----Original Message-----
                        From: Peter R. Locke [mailto:plocke@...]
                        Sent: Friday, November 30, 2001 10:46 AM
                        To: Behavioral-Finance@yahoogroups.com
                        Subject: RE: Fw: [Behavioral-Finance] Recession


                        I did not introduce bias in my framework....I was discussing a disperse
                        information idea, rather than common information, and trading being
                        necessary to reveal the idiosyncratic information, and if so it may be worth
                        mimmicking, depending on how noisy the information signals are. Imagine a
                        situation where two travelers from southern illinois take different paths to
                        get to chicago, passing by farm after farm of soybean and corn. When they
                        arrive, they each have some independent information about the crops. They
                        trade futures, and their trading reveals to other traders, in a noisy way,
                        obviously, what they have seen. I think this is kind of like the
                        Grossman-Stiglitz model. If trading does not cause prices to fully adjust,
                        then it may be (may be may be may be) under certain conditions, rational for
                        some other bystanders to also trade, until the information is fully
                        revealed. It is not necessary that there be overreaction due to the
                        herding, though that is one outcome in some situations.

                        But thats just the naive academic emerging again, trying to temper these
                        absolute statements that eminate from the professionals...Perhaps there is
                        no information in the real world, just traders chasing each other's tails,
                        for no real purpose whatsoever, simply a big zero sum game. \

                        -----Original Message-----
                        From: Bob Bronson [mailto:bob@...]
                        Sent: Friday, November 30, 2001 12:28 PM
                        To: Behavioral-Finance@yahoogroups.com
                        Subject: RE: Fw: [Behavioral-Finance] Recession


                        No, Peter, multiple trades makes it trend-following
                        since each trade has a similar bias, which is both
                        immediately self-fulfilling, causing the trend, and
                        eventually its exhaustion becomes self-defeating.

                        Bob Bronson
                        Bronson Capital Markets Research



                        -----Original Message-----
                        From: Peter R. Locke [mailto:plocke@...]
                        Sent: Friday, November 30, 2001 8:46 AM
                        To: Behavioral-Finance@yahoogroups.com
                        Subject: RE: Fw: [Behavioral-Finance] Recession


                        Herding may be rational...it works for the gazelle and the zebra. Relates
                        to an efficient signal extraction and asymmetric information framework. If
                        you know something and I know something, and I think your know something,
                        and you think I know something, and we reveal this knowledge by trading, it
                        might behoove us (herd pun intended) to follow each other. Note it is
                        trade, not trend, following.

                        -----Original Message-----
                        From: Bob Bronson [mailto:bob@...]
                        Sent: Friday, November 30, 2001 10:33 AM
                        To: Behavioral-Finance@yahoogroups.com
                        Subject: RE: Fw: [Behavioral-Finance] Recession


                        Don't confuse "current" relative sales and earnings
                        growth superiority with "future" stock prices. Such
                        fully-recognized fundamentals cause overvaluation and
                        some of these are the best short sales candidates -
                        right now!

                        The BF application here is trend-following or "herding"
                        as everybody knows these current fundamentals and as a
                        result, they are already fully invested in these areas
                        and therefore these stocks are over owned "today".

                        Our research suggests this bearish sector view will become
                        very clear over the next several months, and quarters.

                        Bob Bronson
                        Bronson Capital Markets Research


                        -----Original Message-----
                        From: leif_ericssen@... [mailto:leif_ericssen@...]
                        Sent: Thursday, November 29, 2001 3:57 PM
                        To: Behavioral-Finance@yahoogroups.com
                        Subject: Re: Fw: [Behavioral-Finance] Recession


                        (Speaking from the US) consumer staples and health care are not
                        highly affected by a recession, but investors know that.

                        Some banking and other financial services can still be profitable,
                        too, and that may not be fully discounted by markets.

                        At this point, some transportation stocks may be worthwhile, since
                        transportation firms will be early in the economic recovery and they
                        have adapted to disruption in other places with things like war and
                        terrorism.

                        For any cyclical or seasonal consumer goods, I would look for firms
                        with above average sales/inventory (or with a sales/inventory
                        declining less than average)

                        I don't know if that is what you mean by a BF way of approaching
                        investing? Personally, I haven't gone into "top-down" industry
                        analysis in investing before, these are just ideas I offered. Right
                        now, I'm probably looking most at smaller growth firms in stock
                        selection FWIW.

                        Regards,
                        Jan

                        --- In Behavioral-Finance@y..., "HPB" <bobbymilk1@h...> wrote:
                        > Hello everybody,
                        >
                        > Nobody from the list answered me when I posted the following
                        message. Maybe my wondering wasn't interesting but it is getting more
                        and more accurate, isn't it ?
                        >
                        > ps: I don't need the answer any more, it is just for fun. Thanks
                        for your "theories sharing" anyway.
                        >
                        > ----- Original Message -----
                        > From: Bobby Milk
                        > To: Behavioral-Finance@y...
                        > Sent: Thursday, April 05, 2001 7:15 AM
                        > Subject: Fw: [Behavioral-Finance] Recession
                        >
                        >
                        >
                        >
                        > Hi everybody,
                        >
                        > I am looking for a piece of information and I am convinced that
                        some of the "top notch" people from this list will be able to help me.
                        >
                        > Mispricing means to exploit an anomaly regarding the traditional
                        EMH approach that is economically valuable (including transaction
                        costs and risk aversion).
                        > If we assume a recession, exploiting this fact by investing in
                        firms which business isn't correlated with GNP (or negatively
                        correlated, if any) or investing in any firms (that I would like to
                        identify) able to "outperform" in such an economic environment, can
                        it be approached in a Behavioral Finance way ???
                        >
                        >
                        > Thanks for your help, and thanks for your everyday "knowledge and
                        ideas sharing"...
                        >
                        > P.S.: Excuse my French !!!
                        >
                        > HPB.
                        >
                        >
                        >
                        >
                        > ---
                        > Outgoing mail is certified Virus Free.
                        > Checked by AVG anti-virus system (http://www.grisoft.com).
                        > Version: 6.0.295 / Virus Database: 159 - Release Date: 01/11/2001



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                      • Objectifs +
                        I would not mind to receive a piece of information on your research(s) and fully understand your disapointmeent being treated unfairly (the n.b.g. people
                        Message 11 of 28 , Dec 11, 2001
                        View Source
                        • 0 Attachment
                          I would not mind to receive a piece of information on your research(s) and fully understand your disapointmeent being treated unfairly (the n.b.g. people versus v.b.g. non bloody good versus very bloody good).As we say in France : << les chiens aboient, la caravane passe>
                          ----- Original Message -----
                          Sent: Saturday, December 01, 2001 8:21 PM
                          Subject: RE: Fw: [Behavioral-Finance] Recession

                          Q "What trades are you talking about???"
                          A Trades in your theory of non-overlapping "disperse
                          information" as I explained.

                          Your personalistic evaluations are - again - wrong.

                          I'm not a trader, as I thoroughly explained before,
                          even if I have knowledge about trading.  We are known
                          for our predictive modeling  work in capital markets. 
                          What you confuse is my intolerance for conjecture
                          that is not supported.  I have sent you some of our
                          work, and as yet, have not received any comment -
                          meaningful or otherwise.  Where's your work, as I
                          would be more than pleased to critique it.

                          Are you even incapable of critiquing ideas that are
                          contrary to your own?  Are you only interested in
                          determining whether some is worthy of your self-
                          worshipping brotherhood or not? 

                          You should avoid trying to assert math is not a
                          science, which certainly is not why math is why
                          the Nobel Foundation doesn't do math. If you
                          would like, we could submit your theory to them
                          for comment, as I'm sure they would be even more
                          anxious for the opportunity to correct your, and
                          perhaps others, misapprehension in this regard.

                          We are in constant contact with many academics,
                          so that is not a problem bridge to cross for us. 
                          The only thing that is bugging me in this issue
                          is your non-responses to the issues at hand. 

                          Please try harder to discuss the issues, at least
                          so that I don't feel so compelled to respond to
                          your wrongheaded, if not meanspirited personalistic
                          comments.

                          Sincerely,

                          Bob Bronson
                          Bronson Capital Markets Research


                          -----Original Message-----
                          From: Peter R. Locke [mailto:plocke@...]
                          Sent: Saturday, December 01, 2001 7:47 AM
                          To: Behavioral-Finance@yahoogroups.com
                          Subject: RE: Fw: [Behavioral-Finance] Recession


                          What trades are you talking about???  You are clearly mistaking your trading
                          world for the problems faced by social scientists of modeling.  Modeling
                          involves forming a system of assumptions, leading to logical conclusions
                          which may then be tested.  This in order to escape the problem of
                          parochialism to which we are all burdened, being biased by our surroundings,
                          current events, etc.
                          It is this disconnect between the practitioner and scientist that seems to
                          really bug you.  The scientist is trying to look at the bigger picture, at
                          least I think so.  I get the feeling that you have no role for science, and
                          would just as soon see it disappear.  This, I believe, ignores the manifold
                          contributions of science.

                          The logic of science is that cases do not prove a point.  Science is the art
                          of testing theories and disproving.  No one proves anything except in
                          mathematics, which is why there is no nobel prize in math, it is not a
                          science.  We don't prove the world is round, we prove it is not flat.
                          Absolute statements imply some meta-scientific knowledge, such as a belief
                          in creationsism, rather than a scientific examination.  The fact that
                          someone makes money trading, for example, does not prove that markets are
                          inefficient.  This seems to be a big problem for traders, who feel that when
                          they make money it proves market inefficiency.  But we've gone around on
                          this one before.

                          By the way, while I have not been on a trading desk, in my work in
                          litigation I have been in contact, helped depose, and otherwise dealt with
                          many traders, back office folks, exchange officials, regulators, etc.  This
                          I consider an invaluable source of information, of which I'm sure you'ld
                          agree.


                          -----Original Message-----
                          From: Bob Bronson [mailto:bob@...]
                          Sent: Friday, November 30, 2001 8:06 PM
                          To: Behavioral-Finance@yahoogroups.com
                          Subject: RE: Fw: [Behavioral-Finance] Recession


                          The bias that I pointed out is the result of the provable
                          fact that virtually all trades are based upon at least
                          some common information, especially with emphasis placed
                          upon recent price cycle-trend.  Have you ever worked at
                          a trading desk, or on exchange floor?

                          A theory of non-overlapping "disperse information" maybe
                          an interesting academic polemic, but it doesn't reflect
                          what traders and investors think and do.

                          Upon further consideration, I would even argue it is both
                          necessary and sufficient for fully discounted information
                          to lead to both the self-fulfilling and self-defeating
                          aspect of cycle-trends.

                          In any case, time series correlations of prices and
                          various quantified sentiment measures prove "herding"
                          always leads to reversion-to-the-extreme in cycle-trends.
                          This becomes obvious when one works with these things on
                          a multi-time-horizon basis: hourly, daily, weekly, monthly,
                          quarter, yearly and even longer like BAAC Supercycles.

                          Don't you agree that supported, or supportable, absolute
                          statements are more useful than unsupported conjectures?

                          Even if one attempts to prove the aggregate of all players
                          is a zero-sum game, don't you agree that such a proof will
                          will have little bearing on the stronger condition that it
                          is a zero-sum game for each agent individually?  Of course,
                          if the stronger condition could be proved, then the weaker
                          one would be true, but that approach is fruitless since
                          thousands if not millions walk away ahead of the game.


                          -----Original Message-----
                          From: Peter R. Locke [mailto:plocke@...]
                          Sent: Friday, November 30, 2001 10:46 AM
                          To: Behavioral-Finance@yahoogroups.com
                          Subject: RE: Fw: [Behavioral-Finance] Recession


                          I did not introduce bias in my framework....I was discussing a disperse
                          information idea, rather than common information, and trading being
                          necessary to reveal the idiosyncratic information, and if so it may be worth
                          mimmicking, depending on how noisy the information signals are.  Imagine a
                          situation where two travelers from southern illinois take different paths to
                          get to chicago, passing by farm after farm of soybean and corn.  When they
                          arrive, they each have some independent information about the crops.  They
                          trade futures, and their trading reveals to other traders, in a noisy way,
                          obviously, what they have seen.  I think this is kind of like the
                          Grossman-Stiglitz model.  If trading does not cause prices to fully adjust,
                          then it may be (may be may be may be) under certain conditions, rational for
                          some other bystanders to also trade, until the information is fully
                          revealed.  It is not necessary that there be overreaction due to the
                          herding, though that is one outcome in some situations.

                          But thats just the naive academic emerging again, trying to temper these
                          absolute statements that eminate from the professionals...Perhaps there is
                          no information in the real world, just traders chasing each other's tails,
                          for no real purpose whatsoever, simply a big zero sum game.  \

                          -----Original Message-----
                          From: Bob Bronson [mailto:bob@...]
                          Sent: Friday, November 30, 2001 12:28 PM
                          To: Behavioral-Finance@yahoogroups.com
                          Subject: RE: Fw: [Behavioral-Finance] Recession


                          No, Peter, multiple trades makes it trend-following
                          since each trade has a similar bias, which is both
                          immediately self-fulfilling, causing the trend, and
                          eventually its exhaustion becomes self-defeating.

                          Bob Bronson
                          Bronson Capital Markets Research



                          -----Original Message-----
                          From: Peter R. Locke [mailto:plocke@...]
                          Sent: Friday, November 30, 2001 8:46 AM
                          To: Behavioral-Finance@yahoogroups.com
                          Subject: RE: Fw: [Behavioral-Finance] Recession


                          Herding may be rational...it works for the gazelle and the zebra.  Relates
                          to an efficient signal extraction and asymmetric information framework.  If
                          you know something and I know something, and I think your know something,
                          and you think I know something, and we reveal this knowledge by trading, it
                          might behoove us (herd pun intended) to follow each other.  Note it is
                          trade, not trend, following.

                          -----Original Message-----
                          From: Bob Bronson [mailto:bob@...]
                          Sent: Friday, November 30, 2001 10:33 AM
                          To: Behavioral-Finance@yahoogroups.com
                          Subject: RE: Fw: [Behavioral-Finance] Recession


                          Don't confuse "current" relative sales and earnings
                          growth superiority with "future" stock prices.  Such
                          fully-recognized fundamentals cause overvaluation and
                          some of these are the best short sales candidates -
                          right now!

                          The BF application here is trend-following or "herding"
                          as everybody knows these current fundamentals and as a
                          result, they are already fully invested in these areas
                          and therefore these stocks are over owned "today".

                          Our research suggests this bearish sector view will become
                          very clear over the next several months, and quarters.

                          Bob Bronson
                          Bronson Capital Markets Research


                          -----Original Message-----
                          From: leif_ericssen@... [mailto:leif_ericssen@...]
                          Sent: Thursday, November 29, 2001 3:57 PM
                          To: Behavioral-Finance@yahoogroups.com
                          Subject: Re: Fw: [Behavioral-Finance] Recession


                          (Speaking from the US) consumer staples and health care are not
                          highly affected by a recession, but investors know that.

                          Some banking and other financial services can still be profitable,
                          too, and that may not be fully discounted by markets.

                          At this point, some transportation stocks may be worthwhile, since
                          transportation firms will be early in the economic recovery and they
                          have adapted to disruption in other places with things like war and
                          terrorism.

                          For any cyclical or seasonal consumer goods, I would look for firms
                          with above average sales/inventory (or with a sales/inventory
                          declining less than average)

                          I don't know if that is what you mean by a BF way of approaching
                          investing? Personally, I haven't gone into "top-down" industry
                          analysis in investing before, these are just ideas I offered. Right
                          now, I'm probably looking most at smaller growth firms in stock
                          selection FWIW.

                          Regards,
                          Jan

                          --- In Behavioral-Finance@y..., "HPB" <bobbymilk1@h...> wrote:
                          > Hello everybody,
                          >
                          > Nobody from the list answered me when I posted the following
                          message. Maybe my wondering wasn't interesting but it is getting more
                          and more accurate, isn't it ?
                          >
                          > ps: I don't need the answer any more, it is just for fun. Thanks
                          for your "theories sharing" anyway.
                          >
                          > ----- Original Message -----
                          > From: Bobby Milk
                          > To: Behavioral-Finance@y...
                          > Sent: Thursday, April 05, 2001 7:15 AM
                          > Subject: Fw: [Behavioral-Finance] Recession
                          >
                          >
                          >
                          >
                          > Hi everybody,
                          >
                          > I am looking for a piece of information and I am convinced that
                          some of the "top notch" people from this list will be able to help me.
                          >
                          > Mispricing means to exploit an anomaly regarding the traditional
                          EMH approach that is economically valuable (including transaction
                          costs and risk aversion).
                          > If we assume a recession, exploiting this fact by investing in
                          firms which business isn't correlated with GNP (or negatively
                          correlated, if any) or investing in any firms (that I would like to
                          identify) able to "outperform" in such an economic environment, can
                          it be approached in a Behavioral Finance way ???
                          >
                          >
                          > Thanks for your help, and thanks for your everyday "knowledge and
                          ideas sharing"...
                          >
                          > P.S.: Excuse my French !!!
                          >
                          > HPB.
                          >
                          >
                          >
                          >
                          > ---
                          > Outgoing mail is certified Virus Free.
                          > Checked by AVG anti-virus system (http://www.grisoft.com).
                          > Version: 6.0.295 / Virus Database: 159 - Release Date: 01/11/2001



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                        • Bob Bronson
                          I appreciate your understanding and have attached a summary of my background, which explains where I m coming from on EMH and exploitable anomaly issues. Bob
                          Message 12 of 28 , Dec 26, 2001
                          View Source
                          • 0 Attachment
                            I appreciate your understanding and have attached a
                            summary of my background, which explains where I'm
                            coming from on EMH and exploitable anomaly issues.
                             
                            Bob Bronson
                            Bronson Capital Markets Research
                            -----Original Message-----
                            From: Objectifs + [mailto:dax@...]
                            Sent: Tuesday, December 11, 2001 7:05 AM
                            To: Behavioral-Finance@yahoogroups.com
                            Subject: Re: Fw: [Behavioral-Finance] Recession

                            I would not mind to receive a piece of information on your research(s) and fully understand your disapointmeent being treated unfairly (the n.b.g. people versus v.b.g. non bloody good versus very bloody good).As we say in France : << les chiens aboient, la caravane passe>
                            ----- Original Message -----
                            Sent: Saturday, December 01, 2001 8:21 PM
                            Subject: RE: Fw: [Behavioral-Finance] Recession

                            Q "What trades are you talking about???"
                            A Trades in your theory of non-overlapping "disperse
                            information" as I explained.

                            Your personalistic evaluations are - again - wrong.

                            I'm not a trader, as I thoroughly explained before,
                            even if I have knowledge about trading.  We are known
                            for our predictive modeling  work in capital markets. 
                            What you confuse is my intolerance for conjecture
                            that is not supported.  I have sent you some of our
                            work, and as yet, have not received any comment -
                            meaningful or otherwise.  Where's your work, as I
                            would be more than pleased to critique it.

                            Are you even incapable of critiquing ideas that are
                            contrary to your own?  Are you only interested in
                            determining whether some is worthy of your self-
                            worshipping brotherhood or not? 

                            You should avoid trying to assert math is not a
                            science, which certainly is not why math is why
                            the Nobel Foundation doesn't do math. If you
                            would like, we could submit your theory to them
                            for comment, as I'm sure they would be even more
                            anxious for the opportunity to correct your, and
                            perhaps others, misapprehension in this regard.

                            We are in constant contact with many academics,
                            so that is not a problem bridge to cross for us. 
                            The only thing that is bugging me in this issue
                            is your non-responses to the issues at hand. 

                            Please try harder to discuss the issues, at least
                            so that I don't feel so compelled to respond to
                            your wrongheaded, if not meanspirited personalistic
                            comments.

                            Sincerely,

                            Bob Bronson
                            Bronson Capital Markets Research


                            -----Original Message-----
                            From: Peter R. Locke [mailto:plocke@...]
                            Sent: Saturday, December 01, 2001 7:47 AM
                            To: Behavioral-Finance@yahoogroups.com
                            Subject: RE: Fw: [Behavioral-Finance] Recession


                            What trades are you talking about???  You are clearly mistaking your trading
                            world for the problems faced by social scientists of modeling.  Modeling
                            involves forming a system of assumptions, leading to logical conclusions
                            which may then be tested.  This in order to escape the problem of
                            parochialism to which we are all burdened, being biased by our surroundings,
                            current events, etc.
                            It is this disconnect between the practitioner and scientist that seems to
                            really bug you.  The scientist is trying to look at the bigger picture, at
                            least I think so.  I get the feeling that you have no role for science, and
                            would just as soon see it disappear.  This, I believe, ignores the manifold
                            contributions of science.

                            The logic of science is that cases do not prove a point.  Science is the art
                            of testing theories and disproving.  No one proves anything except in
                            mathematics, which is why there is no nobel prize in math, it is not a
                            science.  We don't prove the world is round, we prove it is not flat.
                            Absolute statements imply some meta-scientific knowledge, such as a belief
                            in creationsism, rather than a scientific examination.  The fact that
                            someone makes money trading, for example, does not prove that markets are
                            inefficient.  This seems to be a big problem for traders, who feel that when
                            they make money it proves market inefficiency.  But we've gone around on
                            this one before.

                            By the way, while I have not been on a trading desk, in my work in
                            litigation I have been in contact, helped depose, and otherwise dealt with
                            many traders, back office folks, exchange officials, regulators, etc.  This
                            I consider an invaluable source of information, of which I'm sure you'ld
                            agree.


                            -----Original Message-----
                            From: Bob Bronson [mailto:bob@...]
                            Sent: Friday, November 30, 2001 8:06 PM
                            To: Behavioral-Finance@yahoogroups.com
                            Subject: RE: Fw: [Behavioral-Finance] Recession


                            The bias that I pointed out is the result of the provable
                            fact that virtually all trades are based upon at least
                            some common information, especially with emphasis placed
                            upon recent price cycle-trend.  Have you ever worked at
                            a trading desk, or on exchange floor?

                            A theory of non-overlapping "disperse information" maybe
                            an interesting academic polemic, but it doesn't reflect
                            what traders and investors think and do.

                            Upon further consideration, I would even argue it is both
                            necessary and sufficient for fully discounted information
                            to lead to both the self-fulfilling and self-defeating
                            aspect of cycle-trends.

                            In any case, time series correlations of prices and
                            various quantified sentiment measures prove "herding"
                            always leads to reversion-to-the-extreme in cycle-trends.
                            This becomes obvious when one works with these things on
                            a multi-time-horizon basis: hourly, daily, weekly, monthly,
                            quarter, yearly and even longer like BAAC Supercycles.

                            Don't you agree that supported, or supportable, absolute
                            statements are more useful than unsupported conjectures?

                            Even if one attempts to prove the aggregate of all players
                            is a zero-sum game, don't you agree that such a proof will
                            will have little bearing on the stronger condition that it
                            is a zero-sum game for each agent individually?  Of course,
                            if the stronger condition could be proved, then the weaker
                            one would be true, but that approach is fruitless since
                            thousands if not millions walk away ahead of the game.


                            -----Original Message-----
                            From: Peter R. Locke [mailto:plocke@...]
                            Sent: Friday, November 30, 2001 10:46 AM
                            To: Behavioral-Finance@yahoogroups.com
                            Subject: RE: Fw: [Behavioral-Finance] Recession


                            I did not introduce bias in my framework....I was discussing a disperse
                            information idea, rather than common information, and trading being
                            necessary to reveal the idiosyncratic information, and if so it may be worth
                            mimmicking, depending on how noisy the information signals are.  Imagine a
                            situation where two travelers from southern illinois take different paths to
                            get to chicago, passing by farm after farm of soybean and corn.  When they
                            arrive, they each have some independent information about the crops.  They
                            trade futures, and their trading reveals to other traders, in a noisy way,
                            obviously, what they have seen.  I think this is kind of like the
                            Grossman-Stiglitz model.  If trading does not cause prices to fully adjust,
                            then it may be (may be may be may be) under certain conditions, rational for
                            some other bystanders to also trade, until the information is fully
                            revealed.  It is not necessary that there be overreaction due to the
                            herding, though that is one outcome in some situations.

                            But thats just the naive academic emerging again, trying to temper these
                            absolute statements that eminate from the professionals...Perhaps there is
                            no information in the real world, just traders chasing each other's tails,
                            for no real purpose whatsoever, simply a big zero sum game.  \

                            -----Original Message-----
                            From: Bob Bronson [mailto:bob@...]
                            Sent: Friday, November 30, 2001 12:28 PM
                            To: Behavioral-Finance@yahoogroups.com
                            Subject: RE: Fw: [Behavioral-Finance] Recession


                            No, Peter, multiple trades makes it trend-following
                            since each trade has a similar bias, which is both
                            immediately self-fulfilling, causing the trend, and
                            eventually its exhaustion becomes self-defeating.

                            Bob Bronson
                            Bronson Capital Markets Research



                            -----Original Message-----
                            From: Peter R. Locke [mailto:plocke@...]
                            Sent: Friday, November 30, 2001 8:46 AM
                            To: Behavioral-Finance@yahoogroups.com
                            Subject: RE: Fw: [Behavioral-Finance] Recession


                            Herding may be rational...it works for the gazelle and the zebra.  Relates
                            to an efficient signal extraction and asymmetric information framework.  If
                            you know something and I know something, and I think your know something,
                            and you think I know something, and we reveal this knowledge by trading, it
                            might behoove us (herd pun intended) to follow each other.  Note it is
                            trade, not trend, following.

                            -----Original Message-----
                            From: Bob Bronson [mailto:bob@...]
                            Sent: Friday, November 30, 2001 10:33 AM
                            To: Behavioral-Finance@yahoogroups.com
                            Subject: RE: Fw: [Behavioral-Finance] Recession


                            Don't confuse "current" relative sales and earnings
                            growth superiority with "future" stock prices.  Such
                            fully-recognized fundamentals cause overvaluation and
                            some of these are the best short sales candidates -
                            right now!

                            The BF application here is trend-following or "herding"
                            as everybody knows these current fundamentals and as a
                            result, they are already fully invested in these areas
                            and therefore these stocks are over owned "today".

                            Our research suggests this bearish sector view will become
                            very clear over the next several months, and quarters.

                            Bob Bronson
                            Bronson Capital Markets Research


                            -----Original Message-----
                            From: leif_ericssen@... [mailto:leif_ericssen@...]
                            Sent: Thursday, November 29, 2001 3:57 PM
                            To: Behavioral-Finance@yahoogroups.com
                            Subject: Re: Fw: [Behavioral-Finance] Recession


                            (Speaking from the US) consumer staples and health care are not
                            highly affected by a recession, but investors know that.

                            Some banking and other financial services can still be profitable,
                            too, and that may not be fully discounted by markets.

                            At this point, some transportation stocks may be worthwhile, since
                            transportation firms will be early in the economic recovery and they
                            have adapted to disruption in other places with things like war and
                            terrorism.

                            For any cyclical or seasonal consumer goods, I would look for firms
                            with above average sales/inventory (or with a sales/inventory
                            declining less than average)

                            I don't know if that is what you mean by a BF way of approaching
                            investing? Personally, I haven't gone into "top-down" industry
                            analysis in investing before, these are just ideas I offered. Right
                            now, I'm probably looking most at smaller growth firms in stock
                            selection FWIW.

                            Regards,
                            Jan

                            --- In Behavioral-Finance@y..., "HPB" <bobbymilk1@h...> wrote:
                            > Hello everybody,
                            >
                            > Nobody from the list answered me when I posted the following
                            message. Maybe my wondering wasn't interesting but it is getting more
                            and more accurate, isn't it ?
                            >
                            > ps: I don't need the answer any more, it is just for fun. Thanks
                            for your "theories sharing" anyway.
                            >
                            > ----- Original Message -----
                            > From: Bobby Milk
                            > To: Behavioral-Finance@y...
                            > Sent: Thursday, April 05, 2001 7:15 AM
                            > Subject: Fw: [Behavioral-Finance] Recession
                            >
                            >
                            >
                            >
                            > Hi everybody,
                            >
                            > I am looking for a piece of information and I am convinced that
                            some of the "top notch" people from this list will be able to help me.
                            >
                            > Mispricing means to exploit an anomaly regarding the traditional
                            EMH approach that is economically valuable (including transaction
                            costs and risk aversion).
                            > If we assume a recession, exploiting this fact by investing in
                            firms which business isn't correlated with GNP (or negatively
                            correlated, if any) or investing in any firms (that I would like to
                            identify) able to "outperform" in such an economic environment, can
                            it be approached in a Behavioral Finance way ???
                            >
                            >
                            > Thanks for your help, and thanks for your everyday "knowledge and
                            ideas sharing"...
                            >
                            > P.S.: Excuse my French !!!
                            >
                            > HPB.
                            >
                            >
                            >
                            >
                            > ---
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