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The Illusion of Skill - Evaluating Funds With Skewed Distributions

     The Sharpe Ratio: A Blunt Weapon - Hiding the Risk of Asymmetric Returns

The Rhythm of Movement

“The most exciting rhythms seem unexpected and complex, the most beautiful melodies simple and inevitable.”

-- W.H. Auden

I am absolutely crazy about Pink Floyd, though maybe not quite as nutty bonkers about them as I was during my college years. But both then and now, when I hear their music, I just close my eyes and take in the beauty. The melody moves me.

I recall the night vividly at the Oakland Coliseum...

What Lurks Inside, and Outside

“When you know a thing, to hold that you know it; and when you do not know a thing, to allow that you do not know it -- this is knowledge.”

-- Confucius

Last week Los Angeles experienced what us Southern Californians call crazy weather, with one heavy rainy day after another. For all of you who live in parts of the country (or world) where rain is part of life, this feels like just another day, but...

From Calm to Chaos

"Assumptions are the termites of relationships' ~ Henry Winkler


I warmly recall my long-ago best friend Darren. In the late 90’s, he and I were an unstoppable riot act, laughing our way through hours upon hours of conversation, hanging out, dining out, biking through Central Park on weekends, and being all around adventure buddies. Then, around 2009, I met Casey, an amazing woman who I ended up marrying in 20...

Time's Up - Time Is the Greater Evil

"Time is the longest distance between two places"  ~ Tennessee Williams

When I was a little boy, I remember the excitement in the room the day my father brought home our first stereo. There was this silver box, with knobs and numbers on it, about 18 inches square, and about six inches tall, that sat alone on the dresser looking ever so interesting. When my father turned it on, a backlit...

Spacetime Continuum - Where drawdown meets time under water

"Put your hand on a hot stove for a minute, and it seems like an hour.
Sit with a pretty girl for an hour, and it seems like a minute.
That's relativity"  ~ Albert Einstein

As I think back to my academic years, I still recall staring up at the sky in absolute awe as I learned one of the most elegant and fundamental findings at the foundation of modern physics -- Einstei...

Upside Down - Is there any upside to the downside?

"Education is a refuge in adversity" ~ Aristotle

About five years ago, I had a relatively bad cycling accident, where an elderly driver made a wider-than-they-should’ve turn into a parking lot, leaving me nowhere to go but straight into (and onto, and over) their vehicle. The moment my body slammed into the ground I could sense the damage that had been done, and over the next ma...

Erroneus Errors - Distinguishing good errors from bad ones

"Knowledge rests not upon truth alone, but upon error also." ~ Carl Jung

When I was a kid in school and made a mistake on a math test, perhaps having missed a step in the process, the incredibly evident reality was that the final answer was wrong. Regardless of how confident I was in the procedure, an answer in which the two sides just did not equal made me acutely and i...

Fresh off a decent, quick correction to markets around the world (and one in which many unfortunate investors fell prey to the allure of the crowded short volatility trade), it might be insightful to again consider the role negative skew can play in our investment decisions. As you can see from the date ranges of the analyses below, this text was written (on another forum) well before recent events occurred. It just goes to sh...

October 18, 2017

The manager of a statistical-arbitrage fund has developed a measure of risk-adjusted returns that more accurately reflects the risks of investing in hedge funds than the widely used Sharpe ratio.


Logica Capital, a Los Angeles firm with $15 million under management, has shared its “skill metric” with several dozen institutional investors in the past week, telling them it offers a truer picture of a fund’s risk-adjusted performa...

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