How to Succeed in Love (and the Market)

Teresa, February 14, 2008 @ 2:01PM ET | Link | RSS | Read via Email | Start a Discussion  

On the occasion of Valentine’s Day, here is a bit of advice from Amir D. Aczel, author of Chance:

A mathematical theorem has been developed that gives us the best sampling and stopping rule for all these situations. It can be found and further explained in books on probability. But the strategy is as follows:

You will maximize your probability of finding the best spouse if you date about thirty-seven percent of the available candidates in your life, and then choose to stay with the next candidate who is better than all previous ones.

Isn’t it Romantic?
This is, indeed, a very strange-sounding rule. But mathematicians have proved it works better than any other. The number thirty-seven percent is an approximation of the exact number I/e, where e is the base for natural logarithms, or 2.71828 . . . Of course, this rule can’t guarantee success, but, as Churchill said of democracy, it’s the worst strategy except for all others, and it gives you a thirty-seven percent probability of making the best decision. Any other strategy — whether choosing earlier or later — significantly decreases your probability of success in finding the best candidate.

Brain Candy for Thursday

Teresa, February 14, 2008 @ 10:47AM ET | Link | RSS | Read via Email | Start a Discussion  

In light of UBS posting yet another writedown, these two papers are almost a walk down memory lane. For better or for worse, securitization removed the double edge sword that had always tied the lender’s fate with that of the borrower. And now we know: it was for … worse.

Yale Crash Confidence Index

Teresa, February 14, 2008 @ 10:20AM ET | Link | RSS | Read via Email | Start a Discussion  

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The Yale School of Management Stock Market Crash Index measures “Confidence that there will be no stock market crash in the succeeding six months generally declined (though with a lot of ups and downs) over the years since 1989 until the stock market bottomed out in late 2002. Just after the terrorist attacks of September 11, 2001, Crash Confidence actually rose a little. But Crash Confidence reached its lowest point at 20.79% for institutional investors and 28.95% for individual investors as of November 2002. By April 2006, Crash Confidence was up to 57.95% for institutional investors and 48.61% for individual investors.”

Data is updated once per month. Check out the other stock market confidence indexes, especially the comparison of U.S. vs. Japan Crash Indexes.