Research
and Presentations of Prof. Stutzer
Here lies an index to
buried works of minor interest:
Ø
RESEARCH
In the past, my chief
research interests focused on applications of the seemingly physical concept
of Entropy,
to very practical (albeit seemingly unrelated) problems in
(1) Valuation of
Derivative Securities
(2) Statistical Model Parameter Estimation and
(3) Portfolio Choice
Those
seeking a brief survey of some of this hard academic stuff might prefer the
short-but-still-abstruse survey I co-authored in the Encyclopedia of
Quantitative Finance. I am still active in this area, and serve on the
organizational committee for annual conferences devoted to applications of
entropic reasoning sponsored by the Info-Metrics Institute http://www.american.edu/cas/economics/info-metrics/news.cfm.
But recently, I have focused attention on
counterintuitive statistical properties of gambling and investment returns (are
they really much different??). My goal is to help both gamblers and
investors better understand the properties of long-term activity, such as
retirement investing.
I call this area counterintuitive
investment knowledge. Representative papers are our award-winning work The Misuse of Expected Returns
or its webinar,
and my paper about the Parrondo
Paradox. This paradox starts with a
"game" which is more likely to lose money than make it. Now suppose
you alternate play between that "game" and another losing game,
perhaps identical to the first. The paradox is that alternating play between
the two, if done correctly, can wind up more likely to make money than lose
it! Prior to my work, examples of the
paradox were seemingly unrelated to standard models of investment and gambling,
so the conventional wisdom was that this paradox could not arise in those
practical settings. I proved otherwise, in two papers, e.g. see my article A Simple Parrondo Paradox. My colleague Sue Jung Grant and I also
conducted survey research
establishing that the paradox surprises skilled individuals, too
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RECENT PRESENTATIONS
Quantitative
modeling of loan defaults has been a (likely overemphasized) factor
contributing to the Financial Crisis of 2007-8.
Our Info-Metrics Institute is working to improve those statistical
models.
You
may view a presentation I made at one of our conferences, commenting on some
good, recent default models. Here are the
slides.
For
you coffee-stained Quants out there, I modified Merton's celebrated ICAPM to
incorporate effects caused by the secular growth of institutional investing
(i.e. mutual funds, pensions, personal wealth advisors, etc.). I showed that the controversial
"Fama-French 3 Factor Model" of expected stock returns may be explained
by this modification, but if so, there is no reason to use their multifactor
model (or others!) for fund performance evaluation.
You
may view my equation-filled rant on this
slide show.
I
spent a few intense weeks developing the outlook for inflation down the
road. The Federal Reserve has been a
de-facto printing press for funds used to buy Treasury securities and
mortgage-backed securities. These
purchases have created an enormous overhang of bank reserves, which could
create an explosion of spendable funds and subsequent inflation, if and when
the banks lend these reserves out.
You
may view my generally dull but occasionally witty slide show, titled
Whither Inflation
Economics
Prof. Martin Boileau and I presented a public talk about the ideas and impacts
of Nobel Laureate Milton Friedman. Check
out the slide show: Behind
Every Politician is a Dead Economist
I
presented some survey research about the Parrondo Paradox in gambling and
investment -- a must see for those of you interested in the power of
diversification to improve matters -- at an international conference in Halifax. Check out the slide show: Is the Parrondo
Paradox a Paradox?
I
spoke to our alumnae at an event held during December 2010, at Alliance
Bernstein's headquarters in Manhattan.
At the time, there was a lot of controversy about whether or not the
government should take additional "stimulus" and/or monetary
spending. The slide show presents
my (negative!) views on that.