The hottest Financial Modeling Substack posts right now

And their main takeaways
Category
Top Finance Topics

Thinking in N not T

moontower: a stoner dad explains options trading to his kids • 314 implied HN points • 10 Jan 24
💰 Finance Investments Risk Analysis Market Dynamics Financial Modeling
  1. When analyzing data, consider thinking in terms of the number of unique data points (N) rather than the total number of observations (T).
  2. Samples drawn from the same regime reduce the effective number of data points, impacting the reliability of quantitative analysis.
  3. Account for autocorrelation in data to avoid biases in estimating return volatilities and risk, ensuring better comparisons across different investments.

The Wild Nature of Correlations

Reminiscences Of A Young & Naïve Financier • 19 implied HN points • 28 Feb 23
💰 Finance Investing Correlations Market Analysis Asset allocation Financial Modeling
  1. Correlations vary widely over different time intervals, affecting asset allocation decisions.
  2. Shorter time intervals show smaller correlations, while longer intervals have greater variability.
  3. Conservative estimates of correlations using consistent shorter intervals may be more reliable for projecting into the future.

Quant Letter: January 2025, Week-3

The Parlour • 4 implied HN points • 15 Jan 25
💰 Finance Quantitative Analysis Risk management Financial Modeling Market Analysis
  1. A model for pricing VIX options has proven effective in markets like Germany's power and TTF gas markets. This model uses multiple factors to improve accuracy.
  2. The HJM and Lifted Heston Model aims to connect historical data of futures contracts with current implied volatility. This helps better predict market behaviors.
  3. Understanding these models can enhance strategies in quantitative finance, especially for those working with options and futures trading.
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Quant Letter: November 2023, Week 4

The Parlour • 21 implied HN points • 29 Nov 23
💰 Finance Machine Learning Quantitative finance Financial Modeling Portfolio Management
  1. The paper introduces a methodology using Shapley values to understand the contribution of different factors in portfolio performance.
  2. It presents the versatile SPPC method for evaluating predictor group contributions to portfolio success.
  3. The SPPC method quantifies predictor impacts and offers insights into changing dynamics over time in financial machine learning.

Buying the Dip

reedmolbak • 2 HN points • 05 Mar 24
💰 Finance Investing Assets Market Analysis Risk management Financial Modeling
  1. Buying the dip strategy involves waiting for an asset price to drop below a specific threshold before purchasing it, but simulation data shows that this strategy is usually less effective than buying regularly.
  2. When dealing with volatile assets, buying the dip can be beneficial if the asset underperforms in the median case but significantly overperforms occasionally, providing exposure without heavy losses.
  3. For stable assets or normal investors, buying regularly is usually the best strategy as it requires less effort and is generally more effective than trying to time the market by waiting for price dips.

Highly leveraged growth stocks: compounding mistakes

Metacritic Capital • 9 implied HN points • 23 Feb 23
💰 Finance Stocks Investing Market Analysis Financial Modeling Growth Strategies
  1. Companies reporting pre-revenue numbers are often valued higher in the market.
  2. Market often extrapolates current growth to predict long-term growth, leading to significant movements in growth stocks.
  3. Assumptions and dependencies in companies' growth models can cause sharp price swings, even without financial leverage.

A Do-it-yourself (DIY) Valuation of Tesla: Of Investment Regrets and Disagreements!

Musings on Markets • 19 implied HN points • 07 Feb 20
💰 Finance Investing Valuation Market Analysis Financial Modeling Stock Market
  1. Value of Tesla can change based on different factors like growth, profitability, investment, and risk. Each of these areas can greatly influence how much the company might be worth in the future.
  2. Investors should research and make their own estimates for Tesla's future. It's important to look at company performance and market trends to form a realistic view.
  3. Disagreements about Tesla's value are normal and part of investing. Investors should stick to their own valuations and beliefs without getting swayed by market noise.

Up, up and away! A crowd-valuation of Uber!

Musings on Markets • 0 implied HN points • 03 Dec 14
💼 Business Valuation Market Analysis Investment Strategies Startup Growth Financial Modeling
  1. Valuation isn't just about the numbers; it's also about the story behind those numbers. Your personal views and biases will shape how you value a company like Uber.
  2. Different narratives can lead to vastly different valuations. If you see Uber as having a huge market potential, you might arrive at a value much higher than someone who sees it more conservatively.
  3. It's important to update your narrative as new information becomes available. Successful investors often get the narrative right, even if their number crunching isn’t perfect.

Following up on Groupon

Musings on Markets • 0 implied HN points • 04 Nov 11
💰 Finance Valuation Investing Market Trends Stock Analysis Financial Modeling
  1. In investing, it's important to stay humble and be ready to rethink your assumptions. The market might have a different, more optimistic view of a company's growth.
  2. Discounted cash flow (DCF) analysis is not inherently biased against growth companies. It gives a true value based on projected cash flows, even if that feels conservative.
  3. Just because a stock has a high price doesn't mean it's worth that much. Many investors are focused on short-term gains and may buy stocks without understanding their true value.