Random Walks

Tag: Random Walks

Non-Random Walks

Speaking of thinking strategically, I was explaining to my kids why I prefer to drive on “walk to school” day — if everyone else walks to school, think of the great parking spot we’ll get!  It’s hard to imagine a situation where I can arbitrage relative price changes more beautifully, as the price changes are announced in advance.

Of course, the schools seem to have thought of this, too, and have come up with strategies to combat these gross relative price changes.  One strategy is to provide a “celebrity” escort, such as Mayor Tim Hanna seen here strolling through City Park with my wife and son.

Walk to School 1

What a swell guy.  I’ve also got a nice shot of my boy with the school principal and Mayor Hanna that I’m sure will be of interest to posterity.

There are only so many celebrities to go around, of course, so another favorite strategy is the outright bribe with food, especially when handed out by these fine Lawrence Hockey captains.  The captains here include the department’s own “Mr. Z”, and are pictured with Mayor Hanna.

Walk to School 2

Clearly, there are some problems with the latter strategy, as the captains didn’t seem to be discriminating between those who walked and those who were dropped off.  Secondly, it appears that some of the Captains are actually munching on the would-be handouts.

Nonetheless, it was a good show to see these gentlemen out handing out apples at 8 in the morning.

Money in the Market

There has been a recent spate of students asking me for advice on how to “invest” their extra money.   My initial reaction has generally been “in a better hair cut,” but it is probably also useful to tell them how economists think about what’s going on in the equities and securities markets.

So, in that spirit, here are a couple of introductory readings that I would recommend, all available in The Mudd or free online:

Steven Landsburg, “Random Walks and Stock Market Prices: A Primer for Investors,” in The Armchair Economist (initial publication in 1993, updated “for the 21st century” in 2012).

Burton Malkiel, A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (most recent edition in 2007).

Burton Malkiel, “The Efficient Market Hypothesis and Its Critics,” Journal of Economic Perspectives, 17(1):59-82

Robert J. Shiller “From Efficient Markets Theory to Behavioral Finance,” Journal of Economic Perspectives, 17(1): 83–104.

Again, these are simply very good accounts of how mainstream economists view the financial world, so this is not an endorsement of any particular investment strategy and shouldn’t be taken as investment advice.

Unless it works, in which case by all means I’m happy to take credit.