MarketPsych: Profiting from investor pychology — with Dr. Richard Peterson (transcript)

This is a transcript of our interview with Dr. Richard Peterson, author of MarketPsych: How to Manage Fear and Build Your Investor Identity, which came out this year. Check out the archives of our show. Subscribe on iTunes.

Peterson:   There’s a lot of literature in behavioral economies and behavioral finance about the mistakes that people make, like holding their losers too long, or impulsively chasing after stocks. But there isn’t much work about how do you help people to not make those mistakes. So, we’ve really got interested in how do we change people’s decision-making for the better. Continue reading “MarketPsych: Profiting from investor pychology — with Dr. Richard Peterson (transcript)”

Check out the preso from our “building a startup money management biz” event

I was joined by portfolio manager, Cale Smith of Islamorada Investment Management on my “Future of Finance” webinar series yesterday.

Cale addressed his own experiences starting up his own investment firm and the technology, business model and structure he’s used to grow his business over the past 3 years.  Check out our presentation below. Continue reading “Check out the preso from our “building a startup money management biz” event”

How to use economic indicators to become a better investor (transcript)

This is a transcript from an interview with Robert Wright, co-author of a new book, The WSJ Guide to the 50 Economic Indicators That Really Matter: From Big Macs to “Zombie Banks,” the Indicators Smart Investors Watch to Beat the Market. You can listen to the program below or go here.  Check out our interview archives. Subscribe to receive new interviews on iTunes.

The following transcript was paid for at Speechpad.

Announcer: Live from the Internet, it’s Tradestreaming Radio with your host, Tradestreaming.com’s own, Zack Miller.

Zack: Hey, this is Zack Miller. Welcome to Tradestreaming Radio where we help investors make better decisions with tools, tips, and technology. We speak to some of the smartest and most creative people out there working in this space and hope to illuminate some of these ideas to you.

Today’s guest is a co-author of the new book, The WSJ Guide to the 50 Economic Indicators That Really Matter: From Big Macs to “Zombie Banks,” the Indicators Smart Investors Watch to Beat the Market It was co-written by Simon Constable, a journalist at the Wall Street Journal, and Robert Wright.

Robert Wright will be our guest on today’s show. He is the Nef Family Chair of Political Economy at the Augustana College in South Dakota. Wright is an accomplished author. He has two pages worth of books that he’s published on Amazon. He teaches monetary history. He teaches business. He teaches about price discrimination. What I think makes Wright and this book so valuable for people is that it combines detailed scholarship, really sort of drilling down into numbers, fact-based investing. I’m seeing how some of the leading indicators, some economic data and business data that we read about every day in the paper, how those really impact investing, testing them, going as far as seeing whether these data actually help investors and how profitable they may be as investing strategies. But he’s also a good writer. He’s a self-described cynic, along with Simon Constable, and the book has a very good readability.

Some of the things you might learn about in this podcast, so successful investing means making and keeping above market returns at each stage of the business cycle, and this book very much focuses on trying to determine where we are on the map of the business cycle by looking at certain criteria and then figuring out how to invest based upon that location. Investors must correctly forecast the business cycle before they can know which types of specific investments are likely to generate superior returns.

Wright recommends that looking at investing not as a one-off event. It’s a learning process. This is something I talk about in Tradestream all the time. It’s a lifetime commitment to understanding the economy. Forecasting is more art than science. We know this as investors, and it’s good to have rules-based investing, but we know that no rule is going to be right 100%, and our capacity to accurately predict stems from a combination of historical data and a model that correctly identifies causal agents rather than mere statistical correlations.

There are 50 indicators in this book. Some are well known, some are less well known. It’s a good book. It doesn’t cost a whole lot. It’s like $9.99, whether you buy it in mass market paperback or you buy it for the Kindle, which is where I read. It’s useful. It’s definitely important for business cycle investing. It should deserve an important place on your shelf. Continue reading “How to use economic indicators to become a better investor (transcript)”

Using indicators to become a better investor

andrew hallam

On Tradestreaming Radio, we’re interviewing lots of innovative entrepreneurs, investors, and researchers all trying to make investors better at what they do. Check out our archives. Subscribe on iTunes.

We welcome Robert Wright, co-author of a new book The WSJ Guide to the 50 Economic Indicators That Really Matter: From Big Macs to “Zombie Banks,” the Indicators Smart Investors Watch to Beat the Market to Tradestreaming Radio.

Wright is a university professor, prolific author, and a proponent of business-cycle investment philosophy.  Along with WSJ columnist, Simon Constable, he’s written an from big macs to zombie banks, how smart investors make moneyincredible resource for investors.

We discuss:

  • Which economic indicators investors should be focused on
  • Which economic indicators make money, how much money, and how reliable they are
  • New indicators we haven’t heard of before
  • How technology is enabling new indicators to help investors to make better decisions
  • trends in investment book publishing to experiment with digital, freemium model and why he gives away his college textbooks for free
  • creating a broad swath of indicators to best understand all the nuances of the economy

Listen to the whole program

More resources

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MarketPysch: Profiting from investor psychology and the Internet (podcast)

On Tradestreaming Radio, we’re interviewing lots of innovative entrepreneurs, investors, and researchers all trying to make investors better at what they do.  Check out our archives.  Subscribe on iTunes.

From this perch, it seems like investors are witnessing a Renaissance of tools, data, and research that overlays investor psychology on 24/7 streaming content of the Internet.

The magic bullet for individual investors and hedge funds alike is to use this data to create profitable trading strategies.  Previous podcasts have looked at using Google search data to find rising stocks.  Other tradestreaming techniques have centered around creating forecasts of future events using online media.

This week’s guest on Tradestreaming Radio is Richard Peterson, MD (yes, that kind of doctor).  He’s also an RIA and his firm, MarketPsych LLC helps to coach investors and their advisors into making better investment decisions.  More interesting, the firm has developed a sentiment analysis engine from its own experience trading quantitative strategies in an in-house hedge fund.

Dr. Peterson’s new book, MarketPsych: How to Manage Fear and Build Your Investor Identity (Amazon link) is an amazingly refreshing read.  All investors struggle with assessing their risk tolerance, performance and decision making.  While behavioral economics/finance has helped us understand what problems we face, it hasn’t helped a whole lot in truly helping us change our investing behavior. MarketPsych provides a clear overview of the problems and gets its hands dirty helping us investors help ourselves.

In the podcast, we talk about:

  • how investors make decisions
  • how investors can use changes in sentiment to forecast stock price movements
  • how hedge funds use investor psychology and Internet content/social media to profit
  • how technology innovation leads to higher stock prices.

Listen to the whole program

More Resources

 

How to use Google search data to invest (transcript)

This transcript is of a conversation I had with Dr Joey Engelberg, Professor of Finance at the University of North Carolina’s Kenan-Flagler Business School  (listen to the podcast). You can always subscribe to Tradestreaming Radio on iTunes.

In my book, Tradestreaming and on my website, I talk a lot about what I call collateral research. This is information that’s inherently non-financial in nature, but that investors are using to aid in their investment decisions.

Using Google Search Data to Invest by tradestreaming

One example I talk about in the book specifically is Amazon sales data. You can go onto Amazon.com, look up best selling computers, and you can get a list at that moment in time, updated hourly, of what’s selling well. So, if you were an investor in Apple, and Apple was introducing a new product to the market, that information, although it doesn’t say specific sales numbers, of what Apple itself is seeing through selling on Amazon, that information is at least important in the sense of how well a product may be received into the market.

Another area of concern for investors, of interest, is Google search data. Google recognizes that itself, and launched about two years ago on Google Finance something called Google domestic search trends, GDST. That’s a mouthful. What that is basically is Google itself is looking at a vertical search, something about the auto industry, unemployment, something where there are a series of search terms around a particular category, and then mapping them against the volume of other search queries.

So, you can get a feel for, qualitatively, how a certain search term or industry is trending vis a vis the rest of the search market. You can then overlay that information on top of an ETF or a mutual fund that may track that industry, and you can get a view for how well some of that data may, or may not influence future price movements.

Today’s guest on the podcast is Joey Engelberg, who studied this actually quite intensely. He’s a Professor of Finance at the University of North Carolina, the Kenan-Flagler Business School. He previously worked at the SEC, as a research specialist.

He recently produced a paper that caught my eye, called In Search of Attention. That basically looks at Google search data and tries to map it to future price movements. He actually did find a correlation that certain abnormal trends in search data can lead to abnormal returns in the stock market.

Continue reading “How to use Google search data to invest (transcript)”

Tradestreaming Cascade (Week ending 3/26/2011)

A new addition to Tradestreaming, the Tradestreaming Cascade is a highlight reel of some of the past week’s most interesting information.  Much of this comes from my Twitter feed, @newrulesinvest.

How financial blogging landed me a book deal (New Rules of Investing): Blogging is hard to monetize.  Here’s one way financial bloggers can begin to build businesses off their work.

Why investors overpay for certain investments (The Economist): Liquidity and lottery tickets and why the carry trade fails at the wrong time and just below investment grade corporate bonds perform best. From Expected Returns: An investor’s guide to harvesting market rewards.

Trades busted in new FocusShares ETFs (ETF Trends): Scottrade’s new ETF line, Focus Shares, had multiple trades busted.  Some shares saw a 98% drop as Nasdaq canceled them.

Wealth managers refine niche marketing techniques (Registered Rep) : Growing reliance on segmentation of new business development by wealth managers.  This time, Indian Americans.

Investing as a form of peer pressure: teaching kids to invest young (MarketPsych): In an interview with Tile Financial, this money manager/sentiment data player digs deeper to help understand kids’ motivation to invest.

10 most tracked funds, fund groups and stocks (AlphaClone): Most popularly followed hedge funds and stocks held by these hedge funds as tracked by piggyback investment research powerhouse, AlphaClone.

Signup here to receive real-time updates from Tradestreaming.

 

How to use Google search data to invest (podcast)

tradestream radio, discussing investing and technology

In my book, Tradestream, I talk a lot about what I call “Co-lateral Research”.  This is information inherently non-financial in its nature that investors can use to make better investment decisions.

Take Amazon Sales Ranking, for example.  Amazon provides almost real-time ranking of its best selling items.  While Amazon won’t reveal exactly how many units of Apple’s ($AAPL) iPad it’s selling, investors can get a qualitative feel for how well products are moving.

Summary

UNC Professor Joey Engelberg has been studying another form of co-lateral research, Google search data.  He’s been studying search trends for stocks (ie $PCLN or $NFLX) as a way to measure investor attention.  Prof Engelberg has found a linkage between changes in search volume and subsequent moves in stock prices.  He joins us for this installment of Tradestreaming Radio.

We discuss

  • which particular stocks investors pay attention do during the trading day
  • the demand side of news and information for stocks
  • how Google search volume is correlated to stock pricing
  • a trading strategy that uses search volume to beat the market

Listen below

Resources: