Bet on things not changing...
... inertia and entropy rules everything around us.
The final part of our trend-following strategy is now up on Zerodha Varsity: Could Trend-Following Be A Successful Trading Strategy? (Part V). Links to parts 1, 2, 3 and 4.
Inertia - the tendency for things to continue doing what its been doing - and entropy - the tendency for things to gradually break order - are the two most powerful forces in nature. They apply to society as much as they apply to physics. While its fanciful to think about what might happen in the future and bet on it, it is easier to think through how these concepts prevent things from changing.
Read along: fs.blog, collabfund
Markets this Week
More here: country ETFs, fixed income, currencies and commodities.
Links
Research
AI-Powered (Finance) Scholarship (SSRN)
This paper describes a process for automatically generating academic finance papers using large language models (LLMs). It demonstrates the process' efficacy by producing hundreds of complete papers on stock return predictability.
End-of-Day Reversal (SSRN)
Individual stocks experience sharp intraday return reversals in the cross-section during the last 30 minutes of the trading day.
Trading at Round Numbers (SSRN)
Prices of real and private-value assets such as artworks and houses have a strong tendency to cluster at round values.
Investing
Do As I Say, Not As I Did (ofdollarsanddata)
India
A surge in gold imports that widened India’s trade deficit to a record last month and pushed the rupee to an all-time low was due to an error in calculation. (bloomberg, reuters)
Latest data points towards a sustained lack of demand visibility, with sales growth decelerating to 3.5% in 1HFY25, near the Covid lows and 10-year average at 8.4% to a 20-year low. (thehindubusinessline)
India's Tata faces pressure in Starbucks joint venture as consumers cut back (reuters)
About a fifth of all investments by AIFs has been structured to circumvent existing financial regulations like the ones on non-performing assets classification (livemint)
row
Years of poor decisions and some bad luck have shattered Germany’s economic model just when the rest of Europe needs its industrial muscle to help the region keep pace with China, deal with Russia’s war in Ukraine and respond to an increasingly isolationist US. (bloomberg)
We urgently need laws to prevent companies from collecting data about us.
Air fryer manufacturers have been sending personal data to servers in China (sky)
Chinese wi-fi tech used in British homes investigated over hacking fears (telegraph)
VW Suffers Major Breach Exposing Location of 800,000 Electric Vehicles (cyberinsider)
Had economists been paying attention to the evolution of Bangladesh’s political economy, they would have been more sceptical of the Bangladesh “growth model”. They would have paid more attention to Bangladesh’s weaknesses: The lack of diversification in its economy, the small-sized middle class, and subdued wages. (hindustantimes)
Chinese exports are outpacing global trade—with Chinese exports up 12% or more in volume terms while global trade is growing at more like 3% (cfr)
We’re Burning More Coal Than Ever Thanks to China (bloomberg)
The U.S. failed to produce weapons and ammunition fast enough to supply Ukraine. Could it equip its own armed forces in the event of war? (theatlantic)
G.M.’s sales in China have entered a death spiral, falling 42.5% in the first 11 months of this year. The company now ranks 16th by sales. (nytimes)
Meme of the Week
