Eric Falkenstein

Eric Falkenstein is an economist who specializes in quantitative issues in finance: risk management, long/short equity investing, default modeling, etc.

Eric received his Ph.D. in Economics from Northwestern University , 1994 and his B.A. in Economics from Washington University in St. Louis, 1987

He is the author of the 2009 book Finding Alpha.

Visit: Eric Falkenstein's Website

Eric Falkenstein's Latest Articles | 136

How to Alleviate Poverty

Jun 24, 2013| 

James Taranto discusses research on ‘pathological altruism’ in which attempts to promote the welfare of others instead result in unanticipated harm.... Read »

FX Carry Trade is Back

Mar 15, 2013| 

Uncovered interest rate parity suggests that currency returns should relate to interest rates in a pretty straightforward way. For example, the short-term interest... Read »

Health Care End Game Predictable

Feb 22, 2013| 

Ever notice how quickly the health care debate turns to insurance? It has long seemed to me that this is just a trick to advance redistribution under a different... Read »

Correlations in Down Markets Aren’t That Different

Feb 21, 2013| 

Many people assert that correlations totally break down in down markets.  I created a bunch of portfolios from the Russell 2000 going back to July 1962 using the... Read »

Gold/SPY Ratio a Puzzler

Feb 19, 2013| 

If Gold and the stock market are both geometric brownian motion, what are the odds of this pattern? It looks like there’s a clear trend from when the US closed... Read »

Why High Frequency Trading is Not a Problem

Feb 14, 2013| 2

Many people are concerned about the fact that some people can trade more frequently than they can due to having a large infrastructure of high speed computers and... Read »

Al Gore, Sociologists, Address High-Frequency Trades

Feb 11, 2013| 

Al Gore’s latest tome The Future warns us that: There are already several reckless practices that should be immediately stopped: the sale of deadly weapons... Read »

CBO Shenanigans

Jan 22, 2013| 

The US budget deficit has been large for quite a while, and there doesn’t seem to be a lot in terms of revenue increases or expenditure cuts in the pipeline.... Read »

Apple (AAPL) Stock: The Case for Up

Jan 2, 2013| 

With the VIX at lows, and central banks across the globe printing money at breakneck pace, it seems a great time to be long equities. Not that I think this is good... Read »

Cult of the Presidency

Dec 18, 2012| 

Watching the media’s anticipation of Obama’s press conference after the tragic school shooting in Connecticut, I was reminded of the great book The Cult... Read »

Is Low Vol a Beta Phenomenon?

Nov 19, 2012| 

Eugene Fama states that the low volatility anomaly is really just the excess return low beta, and this has been well known for 50 years. I think its indisputable... Read »

Government Response to Scarcity: Make it Free

Nov 13, 2012| 

So, someone decided to make gas free in areas affected by the big northeastern storm, but needless to say, they ran out.  Connecticut, New Jersey, and New Yorkers... Read »

Pointless Econ Debates

Oct 23, 2012| 1

A big point of contentions seems to be whether or not the 2008 slump was a ‘financial-induced recession’, because as Reinhart and Rogoff say these have... Read »

I Would Destroy Half the Value for Half the Price

Oct 18, 2012| 

Below is the stock price over Vikram Pandit’s CEO tenure. He received $1 in 2009 and 2010, but then you knew he would make that up and so in March 2011 he... Read »

Bank Stock Timing Strategy

Oct 1, 2012| 

My bank vega theory I alluded to yesterday argued that when banks are weak, they are in a negative vega zone: the potential for getting stopped out makes them want... Read »

Banks Still in Negative Vega Zone

Oct 1, 2012| 

Recent increases in the monetary base have all gone into excess reserves, and so inflation has remained low, and monetary stimulus isn’t stimulating. This... Read »

Utilities and Low Vol

Sep 18, 2012| 

I spoke with Ben Levinsohn last week, as he’s a pretty good guy for the WSJ who writes about low vol on occasion.  He took this snippet out of our conversation: “If... Read »

Economists Love The Spread

Sep 5, 2012| 

The spread is a debating tactic where you present a set of supporting arguments so wide and particular your opponents are unable to rebut them all because 1) they... Read »

Bad Trades as a Macro Parable

Aug 29, 2012| 

There are two types of bad trades.  The first is the mode-mean trade where the mode is positive the mean zero or negative.  One shouldn’t make this kind... Read »

America’s Future

Aug 9, 2012| 

A good article on Argentina today in the WSJ.  They are a model of where I think America is going.  Lots of regulations and rights to stagnate the economy, lots... Read »

How to Get High Returns From High Volatility Stocks

Aug 1, 2012| 

Rebalance daily! Turan Bali, Nobel Prize winner Robert Engle and Yi Yang, posted Dynamic Conditional Beta is Alive and Well in the Cross-Section of Daily Stock Returns... Read »

How do the 1% Win in a Democracy?

Jul 16, 2012| 

The 99% seem to be pathetic at asserting their self interest. They have a huge majority, but are totally incompetent or unwilling to assert their preferences. What’s... Read »

Mandates are Taxes

Jul 1, 2012| 

Perhaps the reasoning that ‘mandate are taxes’ in Judge Robert’s decision for Obamacare will make it more accepted that taxes are a radical understatement... Read »

Investors Like Large Spreads, Says Broker

Jun 22, 2012| 

Here’s a good example of someone who has learned to rationalize his self-interest so well he does not recognize when he is saying something absurd, from the... Read »

The Fantastic Keynesian Endgame

Jun 21, 2012| 

I really dislike fawning Keynesians because I used to be one when I was a TA for Hyman Minsky back in college (he was a Post-Keynesian). As such I was amored with... Read »

Levered ETFs Highlights Volatility Demand

Jun 13, 2012| 

PowerShares rolled out a pair of ETNs offering inverse exposure to Japanese government bonds, the 3x Japanese Government Bond Futures ETN (JGBT), and the 3x Inverse... Read »

Banks Key to Recovery

Jun 11, 2012| 

With news of a possible bailout in Spain, bank bailouts are in the news again.  I’m a big believer that banks are key to this recovery, but I’m skeptical... Read »

Hedges Don’t Lose Money?

May 14, 2012| 

I was working out watching Jamie Dimon squirm like a worm, reminding me of Lawrence Summers pathetic recant of his rather innocuous speculation about gender talent... Read »

Harvard Risk Confabulations

Apr 11, 2012| 

John Campbell is one of the world’s most esteemed financial economists, which means that he publishes very rigorous and well-received papers showing that some... Read »

SEC Probes High Frequency Trading

Apr 4, 2012| 

A WSJ article discusses what the SEC is looking at: The SEC is examining whether such order types unfairly allow high-speed traders to jump ahead of other investors... Read »

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