Skip to main content

Investing: The Last Liberal Art

I have recently read Investing: The Last Liberal Art. In it, Robert Hagstrom argues that students, investors and investment professionals need a range or latticework of mental models to help them understand the complex world of investment. The mental models come from a wide range of disciplines - mathematics, psychology, philosophy, sociology, biology, decision making, literature and physics. Hagstrom clearly demonstrates how each of these disciplines can help investors think about investing.

I found this book very helpful in thinking about the education of students in my school. The world is a very complex place and we need to have a diversified portfolio of ways of thinking about the world, which only a broad-based education gives us. The university curriculum can become too specialised and narrow, resulting in graduates with an undiversified portfolio of mental models.



Popular posts from this blog

How Valuable Are Connections?

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne...
Read more

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press . 
Read more

Bank Runs in Greece

Deposit withdrawals in Greece have been substantial over the past two years.  However, the failure of Greece's politicians to form a coalition government has resulted in deposit withdrawals accelerating - click here and here for more on this.  Depositors are rightly concerned about the exit of Greece from the euro and the subsequent devaluation of their deposits.  The puzzle for me and many others is why are there so many deposits still remaining in the Greek banking system.  One reason is that the Greek banking system is being kept alive by massive injections of money from the ECB.  Will the ECB continue to support the Greek banking system in the face of a mass withdrawal of deposits?  I doubt that there is the political will in Germany for this as the Bundesbank already has a huge exposure to Greece (as well as Spain and Italy) through the ECB's internal Target 2 system.
Read more