Why you need a "WTF Notebook"

Plus, more links to make you a little bit smarter today.

Writing A Novel But My Stomach Is Trying To Kill Me

What Makes Good Taste?

People tend to argue about “taste” a lot online — whether someone has “good” taste or “bad” taste is considered to be an upmost importance, especially in debates about media. But what the hell is taste, anyway?

Why you need a "WTF Notebook"

There's a very specific reputation I want to have on a team: "Nat helps me solve my problems. Nat get things I care about done."

Solo-Devs and risk-takers (an artistic exploration of experimental tools)

Tools outside of the mainstream, made by just one person, a group of friends, or a small team… all asking 'what if,' and then exploring how their tool can empower creation in an idealistically creative way.

Liquidity Pool Design on Automated Market Makers

Automated market makers are a popular type of decentralized exchange in which users trade assets with each other directly and automatically through a liquidity pool and a fixed pricing function. The liquidity provider contributes to the liquidity pool by supplying assets to the pool and in return they earn transaction fees from traders who trade through the pool. We propose a model of optimal liquidity provision in which the risk-averse liquidity provider decides the investment proportion of wealth she would like to supply to the pool, trade in a centralized market, and consume in multiple periods. We derive the liquidity provider’s optimal strategy by dynamic programming and numerically find the optimal liquidity pool that maximizes the liquidity provider’s utility. Our findings indicate that the exchange rate volatility on the centralized market exerts a positive effect on the optimal transaction fee. Moreover, the optimal constant mean pricing formula is found to be related to the relative performance of the underlying assets on the centralized market.

An Asymmetric Capital Asset Pricing Model

Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing model for measurement of the market risk. It explicitly accounts for the fact that falling prices determine the risk for a long position in the risky asset and the rising prices govern the risk for a short position. Thus, a position dependent market risk measure that is provided accords better with reality. The empirical application reveals that Apple stock is more volatile than the market only for the short seller. Surprisingly, the investor that has a long position in this stock is facing a lower volatility than the market. This property is not captured by the standard asset pricing model, which has important implications for the expected returns and hedging designs.

Does Peer-Reviewed Research Help Predict Stock Returns?

Mining 29,000 accounting ratios for t-statistics over 2.0 leads to cross-sectional return predictability similar to the peer review process. For both methods, about 50% of predictability remains after the original sample periods. Predictors supported by peer-reviewed risk explanations or equilibrium models underperform other predictors post-sample, suggesting peer review systematically mislabels mispricing as risk, though only 20% of predictors are labelled as risk. Data mining generates other features of peer review including the rise in returns as original sample periods end and the speed of post-sample decay. It also uncovers themes like investment, issuance, and accruals—decades before they are published.