Word of the Day: Anomie

[MikeF]

I hope everyone had a wonderful holiday break. I am back on-line and came across this while working with TRAC Monterey, an Operations Research TRADDOC group focused on modeling and forecasting programs for IW.

I thought it maybe helpful for the group.

Anomie is social instability resulting from a breakdown of standards and values ; also : personal unrest, alienation, and uncertainty that comes from a lack of purpose or ideals (Merriam Webster dictionary (http://www.merriam-webster.com/dictionary/anomie)).

Anomie research delves further into the work already published in Dr. Kilcullen's conflict eco-system and Dr. McCormick's Mystic Diamond to further explain, forecast, and solve the complex problems into today's world.

Dr. Niklaus Eggenberger-Argote of the Swiss Academy for Development, a research partner of Dr. Karen Guttieri in the Cebrowski Institute, explains his anomie research at Fields of Activity (http://www.sad.ch/index.php/en/content/Anomy-and-Youth/Relevance-of-Youth-and-Anomie-Research.html)

Globalization has political, economic and cultural dimensions with strong social impacts that present challenges to national and international security. Fast-paced social change leads to an erosion of traditional values, reference points and guiding norms; it challenges identities, world views and behavioral patterns and hampers meaningful interpretation to social reality that result in a loss of orientation (anomie).

Anomie stimulates innovation and creativity, but it also leads to apathy, risk behavior, aggression, violent upheaval or a shift towards radical (but direction-giving) ideologies.

Anomie research:

-is a culturally cross-validated tool that measures psycho-social consequences of rapid social change in different social and cultural settings

-focuses on invisible, but measurable attitudes that precede patterns of behavior

-uncovers hidden structures, processes and risks of instability and violence within a society before they turn into visible patterns of negative behavior (“early detection”)

-allows for a better understanding of the micro-level of society and non-rational decision-making (human behavior, beliefs, social norms, cultural and historical structures, interaction between societies and individuals)

-provides a database for socio-cultural modeling aimed to anticipate and mitigate societal disorders on time

At the individual level, modernization generates feelings of alienation and anomie as traditional bonds and social relations are broken and leads to crisis of identity (...) Samuel P. Huntington

v/r

Mike

[Surferbeetle]

Econometrics (http://en.wikipedia.org/wiki/Econometrics) from wikipedia


Econometrics is concerned with the tasks of developing and applying quantitative or statistical methods to the study and elucidation of economic principles.[1] Econometrics combines economic theory with statistics to analyze and test economic relationships. Theoretical econometrics considers questions about the statistical properties of estimators and tests, while applied econometrics is concerned with the application of econometric methods to assess economic theories. Although the first known use of the term "econometrics" was by Pawel Ciompa in 1910, Ragnar Frisch is given credit for coining the term in the sense that it is used today.[2]

Although many econometric methods represent applications of standard statistical models, there are some special features of economic data that distinguish econometrics from other branches of statistics. Economic data are generally observational, rather than being derived from controlled experiments. Because the individual units in an economy interact with each other, the observed data tend to reflect complex economic equilibrium conditions rather than simple behavioral relationships based on preferences or technology. Consequently, the field of econometrics has developed methods for identification and estimation of simultaneous equation models. These methods allow researchers to make causal inferences in the absence of controlled experiments. Early work in econometrics focused on time-series data, but now econometrics also fully covers cross-sectional and panel data.

Carabenciov, I. Ermolaev, I. Freedman, C., Julliard M., Kamenik, O., Korshunov, D., Laxton, D. (2008). A small quarterly projection model of the US economy. IMF Working Paper WP/08/278

Benninga, S. (2008). Financial modeling (3rd Ed.) Massachusetts Institute of Technology.

Leathwick, J.R., Rowe, D., Richardson, J., Elith, J. & Hastie, T. (2005). Using
multivariate adaptive regression splines to predict the distributions of
New Zealand's freshwater diadromous fish. Freswater Biology, 50,
2034-2052.

It briefs well however, where the rubber meets the road, I am still getting my a@% handed to me with respect to individual stocks despite my crude and incomplete modeling attempts....hmmm :o

[Surferbeetle]

Isaac Asmiov's Foundation Series (http://en.wikipedia.org/wiki/The_Foundation_Series) by Wikipedia


The premise of the series is that mathematician Hari Seldon spent his life developing a branch of mathematics known as psychohistory, a concept devised by Asimov and his editor John W. Campbell. Using the law of mass action, it can predict the future, but only on a large scale; it is error-prone on a small scale. It works on the principle that the behaviour of a mass of people is predictable if the quantity of this mass is very large (equal to the population of the galaxy which has a population of around a quadrillion). The larger the mass, the more predictable is the future. Using these techniques, Seldon foresees the fall of the Galactic Empire, which encompasses the entire Milky Way, and a dark age lasting thirty thousand years before a second great empire arises. To shorten the period of barbarism, he creates two Foundations, small, secluded havens of all human knowledge, on opposite ends of the galaxy. The focus of the trilogy is on the Foundation of the planet Terminus. The people living there are working on an all-encompassing Encyclopedia, and are unaware of Seldon's real intentions (for if they were, the variables would become too uncontrolled). The Encyclopedia serves to preserve knowledge of the physical sciences after the collapse. The Foundation's location is chosen so that it acts as the focal point for the next empire in another thousand years (rather than the projected thirty thousand).

The successful Quantum Fund (http://en.wikipedia.org/wiki/Quantum_Fund) by wikipedia


In 1992, the lead fund, Soros's Quantum Fund became famous for "breaking" the Bank of England, forcing it to devalue the pound. Soros had bet his entire fund in a short sale on the prediction that the British currency would drop in value (it did), a coup that netted him a profit of $1 billion.[citation needed]

The unsuccessful Long Term Capital Management Fund (http://en.wikipedia.org/wiki/Long-Term_Capital_Management) by wikipedia


Long-Term Capital Management (LTCM) was a U.S. hedge fund which used trading strategies such as fixed income arbitrage, statistical arbitrage, and pairs trading, combined with high leverage. It failed spectacularly in the late 1990s, leading to a massive bailout by other major banks and investment houses,[1] which was supervised by the Federal Reserve.

LTCM was founded in 1994 by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Board of directors members included Myron Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economic Sciences.[2] Initially enormously successful with annualized returns of over 40% (after fees) in its first years, in 1998 it lost $4.6 billion in less than four months following the Russian financial crisis and became a prominent example of the risk potential in the hedge fund industry. The fund folded in early 2000.

The Black-Scholes Model (http://en.wikipedia.org/wiki/Black_scholes#Black.E2.80.93Scholes_model) by wikipedia


The model treats only European-style options. From these ideal conditions in the market for an equity (and for an option on the equity), the authors show that the value of an option (the Black-Scholes formula) varies only with the stock price and time to expiry. "Thus it is possible to create a hedged position, consisting of a long position in the stock and a short position in [calls on the same stock], whose value will not depend on the price of the stock."[1]

[Schmedlap]

From your last Wiki quote...

From these ideal conditions in the market for an equity (and for an option on the equity), the authors show that the value of an option (the Black-Scholes formula) varies only with the stock price and time to expiry.And the "risk-free" rate and implied volatility... both of which are anyone's guess in the current climate. That, in my opinion, puts advanced and intermediate options traders on an equal footing (assuming no insider information and strategies other than arbitrage).

But I'm not betting the farm:D