Skip to main content

Posts

Risk, Language, and Terrorism

The use of the words "risk" and "uncertainty" in vernacular English leaves the relationship between the words imprecise.

That is, if I were to ask you, dear reader, what is the difference between risk and uncertainty, there would be no univocal "right" answer, though the words clearly are not synonyms. In general, we think of risk as a less-than-certain loss, so uncertainty figures into it, but uncertainty figures into a lot of other words too (such as "hope," which we think of as a less-than-certain gain).

In finance, and in other areas as well, there has been some movement toward using the two words in a rigorously paired way, such that, to borrow a formulation from the George W. administration, "risk" represents the known unknowns of a situation, "uncertainty" represents the unknown unknowns.

Here's a straightforward example: I know that a certain stock is interest-rate sensitive. I know that the Federal Reserve is m…
Recent posts

Market's Inflationary Expectations

Investors in the spring of 2016 could have gotten ahead of events by aligning their portfolios to “a world of lower expected capital market returns and higher forward volatility.” That, at any rate, was the upshot of a thoughtful analysis by Eric J. Wiegel of Global Focus Capital, a Boston based asset allocation advisor. Why does Wiegel think so? Because the market’s inflationary expectations are/were too low. With the benefit of a year of hindsight ... was Wiegel right? So far as I can tell ... no. In particular, the market's inflationary expectations as of the spring of 2016 for the following year were accurate, and following Wiegel's effort to outguess the market would nought have availed. There was no upsurge in inflation numbers in the months after Wiegel wrote, and in fact investors have since then benefitted by higher than expected capital market returns.

In the five months before and contemporaneous with Wiegel's article, the inflation rate (annualized, that is, mu…

The De-monetization of Politics?

Donald Trump's election as President of the United States in November 2016 may have changed the nature of the political game in several ways, not least by its demotion of the importance of Big Money. Big Money is receding from the scene, leaving a vacuum, and Big Data is poised to fill that space.

The people who worry about Big Money in politics - as well as the people who shrug and accept it - have agreed in recent decades that the key connection between such money on the one hand and electoral success on the other is advertising: especially broadcast advertising

Yet the Hillary Clinton campaign spent a good deal more than Trump's campaign did on advertising. In the first two months of general election political advertising (mid-June to mid-August), her campaign spent $61 million on broadcast ads, while allied independent groups spent another $43 million in her cause.

Trump's campaign didn't spend a dime on broadcast ads during that period, and its independent allies s…

Philosophy Publishing: Not So Sedate?

An odd controversy has popped up in what one might imagine is the sedate world of academic philosophy publishing. In March Hypatia, a quarterly peer-reviewed journal of feminist philosophy, published an article by Prof. Rebecca Tuvel, "In Defense of Trans-Racialism." The gist of it was this: when someone changes his/her mind about racial self-identification, as seems to have been the case with Rachel Dolezal, then she is generally perceived by the public as a fraud. But when the change of self identification is about sexual identity, as with Kaitlyn Jenner, there has been at least some movement of late toward recognition of and respect for that decision. Why the difference? If both sorts of classification are socially constructed, that is if biology is not destiny in either case, then the search for a pertinent principled distinction is not an easy one.
So far so good. Philosophy is about pressing questions. The real controversy arose after the editors of Hypatia (or a majorit…