New white paper from New York Federal Reserve researcher and University of Michigan professor show that risk tastes and overconfidence are related It’s a vicious cycle in trading: overconfident traders push valuations higher, causing traders to become yet more confident, leading to yet higher valuations, sometimes accompanied and facilitated by artificial stimuli such as cocaine — and the opposite spiral occurs in crashes (the study discusses the use of drugs and alcohol in one segment). As long term risk management considerations are put on the back burner, such feedback loops are the natural outcome. Such is the essential finding of a new…
Fed On Trading: Self-Manipulation with Alcohol and Drugs
Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.