Friday Nov 24, 2006

Mr. AI or Mr. Market

So, has Mr. AI any advantages (other than speed, which may cause some self-defeating dynamic instabilities) in comparison to Mr. Market when it comes to voting for stocks? Or will it be any better than a good investor when it comes to weighting the value of stocks?

In general, Mr. Market represents the leveled investing masses roaming the market. There is nothing they do that has any special upside. The good, contrarian investor takes care to stand judiciously apart from such masses.

A given AI algorithm can hardly be said to be any better than any other (composed with the same level of parametrization). If anything, a large number of these algorithm, including neural networks, Baysian belief nets, Markov models, Guassian classifiers, fuzzy ones, etc., are intelligence-equivalent for most practical purposes. Their marginal advantages (in speed and parametrization) when used for leverage can amplify value impact of common investment risks and "errors" just as they may find interesting points in the market for leverage.

So, in the final analysis, while Mr. AI may even choose random rules for analzsis, it will most probablz remain an unrully side-kick of the good investor.

State of US Education

Valerie Strauss of The Washington Post writes about U.S. educational institutions. The article summarizes findings in "Condition of Education" reports published by the U.S. Department of Education. There is a wealth of information in the original reports. For example, at the undergraduate level for every school year from 89-90 to 03-04, more business degrees were awarded than any other degrees.

Thanksgiving in Tehran

Since I have been traveling to Europe to attend a work-related meeting the week after Thanksgiving, I decided to see if I could take an extra day off to pay a visit to family and friends in Tehran during the Thanksgiving holidays. I was fortunate because the circumstances came together and made this possible. So, the moment I arrived in Frankfurt earlier this week, I went to a ticketing agent and purchased a ticket to Tehran. Only 370 Euros from Frankfurt to Tehran on a flight that takes only 4.5 hours. (I paid about that much in the summer of 2004 for a train trip from Frankfurt to London and back.)

In contrast to its hot summers, Tehran is quite cool in November. I arrived at midnight and took a taxi from the airport to my parents, a very smooth ride on the freeways that connect the different parts of the city. My parents were waiting, and after a short nap, I went out to buy sangak bread freshly made in the neighborhood. There had been snow in higher elevations in the city, and as I walked back to have breakfast with my parents, I could see the magnificent mountains to the north covered in a white blanket.

Unfortunately, I was only there for a few days and had no time for mountaineering, an activity everyone who visits Tehran should accommodate in their travel schedule. Instead, I spent most of my time visiting family and friends, includling my good friend and prominent painter Bobak Etminani, who also took me to a birthday party where I met a group of Berkeley (California) friends after more than a decade. We had lots of lively conversations at the party and afterwards, and I had a good chance to touch base with Bobak about the recent turn in his work.

Please stay tuned. I will try to include some images of Bobakäs recent paintings in a blog entry after I return to the States. I will also post some photos on my flickr album.

I should probably end this short diversion by saying that I don't make it a habit to leave my wife and children behind in the U.S. during Thanksgiving holidays. Really, my absence this year was not that bad. Back in California, my family have had very good visiting campany, including many friends and a grand-mother, and they were invited to a very large, extended-family Thanksgiving dinner at my wife's uncle.

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