Related papers: The professional trader's paradox

Siegel's paradox is a fundamental question in international finance about exchange rates for futures contracts and has puzzled many scholars for over forty years. The unorthodox approach presented in this article leads to an arbitrage-free…

Parrondo's paradox occurs in sequences of games in which a winning expectation may be obtained by playing the games in a random order, even though each game in the sequence may be lost when played individually. Several variations of…

We study a random game in which two players in turn play a fixed number of moves. For each move, there are two possible choices. To each possible outcome of the game we assign a winner in an i.i.d. fashion with a fixed parameter p. In the…

The Parrondo effect describes the seemingly paradoxical situation in which two losing games can, when combined, become winning [Phys. Rev. Lett. 85, 24 (2000)]. Here we generalize this analysis to the case where both games are…

Buying or selling assets leads to transaction costs for the investor. On one hand, it is well know to all market practionaires that the transaction costs are positive on average and present therefore systematic loss. On the other hand, for…

In repeated interactions between individuals, we do not expect that exactly the same situation will occur from one time to another. Contrary to what is common in models of repeated games in the literature, most real situations may differ a…

Meta-analysis is an important tool for combining results from multiple studies and has been widely used in evidence-based medicine for several decades. This paper reports, for the first time, an interesting and valuable paradox in…

We present a modification of the so-called Parrondo's paradox where one is allowed to choose in each turn the game that a large number of individuals play. It turns out that, by choosing the game which gives the highest average earnings at…

Players are statistical learners who learn about payoffs from data. They may interpret the same data differently, but have common knowledge of a class of learning procedures. I propose a metric for the analyst's "confidence" in a strategic…

We analyze the relation between earning forecast accuracy and expected profitability of financial analysts. Modeling forecast errors with a multivariate Gaussian distribution, a complete characterization of the payoff of each analyst is…

The combination of the Bayesian game and learning has a rich history, with the idea of controlling a single agent in a system composed of multiple agents with unknown behaviors given a set of types, each specifying a possible behavior for…

Traditional economic models typically treat private information, or signals, as generated from some underlying state. Recent work has explicated alternative models, where signals correspond to interpretations of available information. We…

We provide and axiomatize a representation for preferences over lotteries that generalizes the expected utility model. Since the representation uses different utility functions to evaluate different lotteries, the preferences can be…

Prediction problems in finance go beyond estimating the unknown parameters of a model (e.g. of expected returns). This is because such a model would have to include parameters governing the market participants' propensity to change their…

A generalized model of games is proposed, in which cooperative games and non-cooperative games are special cases. Some games that are neither cooperative nor non-cooperative can be expressed and analyzed. The model is based on relationships…

Hoeffding's Inequality provides the maximum probability that a series of n draws from a bounded random variable differ from the variable's true expectation u by more than given tolerance t. The random variable is typically the error rate of…

Using theory and experiments, this paper shows that the difficulty of making tradeoffs offers a parsimonious explanation for a wide range of behavioral phenomena. We develop a model of imprecise comparisons applicable to multiattribute,…

A gambler walks into a hypothetical fair casino with a very real dollar bill, but by the time he leaves he's exchanged the dollar for a random amount of money. What is lost in the process? It may be that the gambler walks out at the end of…

We consider extensive form win-lose games over a complete binary-tree of depth $n$ where players act in an alternating manner. We study arguably the simplest random structure of payoffs over such games where 0/1 payoffs in the leafs are…

Parrondo's paradox occurs in sequences of games in which a winning expectation value of a payoff may be obtained by playing two games in a random order, even though each game in the sequence may be lost when played individually.Several…