Viswanathan K's Thoughts

The Americans are obsessed with stats, especially when it comes to sports. So it isn’t a surprise that when they hosted the football (soccer) World Cup in 1994, they showed (what seemed to me) ridiculous stats like how much time each team had possession of the ball, or how many fouls each team committed, or how many shots at goal were on-target. Who cared, I thought? After all, what mattered was whether your side won or not. Except that today, such stats are shown in football matches all over the world. But does any of these sport stats have any practical use, I wondered? The Brad Pitt starrer about a true story, Moneyball , answered my question : “The general manager of the Oakland Athletics baseball team, Billy Beane, used statistical analysis to find undervalued players according to one or two key metrics. It worked: the Athletics went on a record-breaking 20-game winning streak in 2002.” But isn’t baseball a totally different kind of game than football? The Economist ar...

Thanks to the ongoing recession, it’s easy to find people today who say that formulas (and the associated maths) don’t work in finance. I don’t know if that’s becoming the widespread belief in finance today, but if it is, it would make it hard for the quants (the guys who apply the maths to finance and come up with the formulas) to find jobs. Then again, the same feeling persisted more than a decade back when a huge hedge fund, LTCM, failed and threatened to take down the system with it. Even back then, there was a comment in the book, When Genius Failed , by a guy who thought that quants picked a physics formula to “jam into finance”! Another quote which I liked questioned the accuracy of formulas in a very funny way: this one by Max Bublitz, a former investment banker: “You take Monica Lewinsky, who walks into Clinton’s office with a pizza. You have no idea where that’s going to go. Yet if you apply math to it, you come up with a thirty-eight percent chance she’s going to go down ...